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Welfare implications of external debt and capital flight in Sub-Saharan Africa (Evidence using panel data modelling)

Author

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  • Isaac Kwesi Ampah

    (Department of Economics Education, University of Education, Winneba, Ghana)

  • Gábor Dávid Kiss

    (Department of Economics Education, University of Education, Winneba, Ghana
    University of Szeged, Institute of Finance and International Economic Relations, University of Szeged, Szeged, Hungary)

Abstract

The countries in Sub-Saharan Africa (SSA) have experienced a positive growth rate of over five per cent per year, on average, since their transition from the Heavily Indebted Poor Countries Initiative in 1996 and the Multilateral Debt Relief Initiative in 2006. Despite this growth, poverty and inequality are still very high. Employing the Driscoll – Kraay standard panel estimation method and dataset from 1990 to 2015, this paper sets out to examine the implications of external debt and capital flight on the general welfare of the people. The estimation results reveal that both external debt and capital flight have a welfare inhibiting effect, suggesting that increases in external borrowing or capital flight may lead to a reduction in the welfare of the people in the sub-region. The study, therefore, recommends to policymakers and government in the sub-region the need to tackle the revolving nature of external borrowing and capital flight and take steps to halt all channels through which deservingly acquired capital leaves the sub-region.

Suggested Citation

  • Isaac Kwesi Ampah & Gábor Dávid Kiss, 2021. "Welfare implications of external debt and capital flight in Sub-Saharan Africa (Evidence using panel data modelling)," Acta Oeconomica, Akadémiai Kiadó, Hungary, vol. 71(2), pages 347-367, June.
    • Handle: RePEc:aka:aoecon:v:71:y:2021:i:2:p:347-367
    DOI: 10.1556/032.2021.00017
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    Keywords

    external debt; capital flight; welfare; Driscoll–Kraay standard errors;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F34 - International Economics - - International Finance - - - International Lending and Debt Problems
    • I31 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - General Welfare, Well-Being

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