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Determinants Of Capital Flight In Pakistan

Author

Listed:
  • Basheer Ahmed
  • Qaim Din Sahto

    (Iqra University Islamabad, Pakistan)

Abstract

Purpose This study investigates the relationship between Capital Flight CF and its Determinants Foreign Direct Investment FDI, External Debt ED, Exchange Rate ER, Foreign Reserves FR, Gross Domestic Product GDP growth, and Inflation I.Methodology/Sample CF from Pakistan is measured through the residual method which is the mostly used method in the literature.This method uses changes in ED, net FDI, Current Account Surplus CAS and changes in the FR to calculate the CF for the period of 1971 to 2011.Findings The results of the study show that there exist relationship between CF and its determinants in the long run whereas no relationship is found in the short run.Practical Implications CF refers to the condition when money, investment, funds and assets rapidly fly out of country due to economic and political events that discourage and cause individual investors and companies to lose their confidence in the host country and its economic and political conditions.

Suggested Citation

  • Basheer Ahmed & Qaim Din Sahto, 2015. "Determinants Of Capital Flight In Pakistan," IBT Journal of Business Studies (JBS), Ilma University, Faculty of Management Science, vol. 11(2), pages 55-64.
    • Handle: RePEc:aib:ibtjbs:v:11:y:2015:i:2:p:55-64
    DOI: https://doi.org/10.46745/ilma.ibtjbs.2015.112.5
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    References listed on IDEAS

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    1. Mr. Simeon Inidayo Ajayi, 1997. "An Analysis of External Debt and Capital Flight in the Severely Indebted Low Income Countries in Sub-Saharan Africa," IMF Working Papers 1997/068, International Monetary Fund.
    2. Ndikumana, Leonce & Boyce, James K., 2003. "Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries," World Development, Elsevier, vol. 31(1), pages 107-130, January.
    3. Rahim Quazi, 2007. "Economic Freedom and Foreign Direct Investment in East Asia," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 12(3), pages 329-344.
    4. Mohammed Salisu, 2005. "The Role of Capital Flight and Remittances in Current Account Sustainability in Sub‐Saharan Africa," African Development Review, African Development Bank, vol. 17(3), pages 382-404.
    5. Niels Hermes & Robert Lensink & Victor Murinde, 2002. "Flight Capital and its Reversal for Development Financing," WIDER Working Paper Series DP2002-99, World Institute for Development Economic Research (UNU-WIDER).
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