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Economic Policy Implications of External Debt and Capital Flight in Sub-Saharan Africa’s Heavily Indebted Poor Countries

Author

Listed:
  • Isaac Kwesi Ampah

    (Faculty of Economics and Business Administration, University of Szeged, Szeged, Hungary)

  • Gabor David Kiss

    (Faculty of Economics and Business Administration, University of Szeged, Szeged, Hungary)

Abstract

The paper analyses the impact of the simultaneous occurrence of external debt and capital flight on economic policy effectiveness in Heavily Indebted Poor Countries (HIPCs) in sub-Saharan Africa, employing the Panel-Corrected Standard Error regression model for the period 1990 to 2015. The empirical results reveal that both monetary and fiscal policies in the region had been undermined in achieving their intended purposes because of increasing capital flight and external debt. Also, the concurrent occurrence of capital flight and external debt has been a hindrance to progress on the continent, particularly by undermining domestic investment. These results call for more practical measures in addressing the issues of foreign debt and capital flight, given the critical importance of domestic private investment for both short- and long-run growth.

Suggested Citation

  • Isaac Kwesi Ampah & Gabor David Kiss, 2019. "Economic Policy Implications of External Debt and Capital Flight in Sub-Saharan Africa’s Heavily Indebted Poor Countries," Society and Economy, Akadémiai Kiadó, Hungary, vol. 41(4), pages 523-542, December.
    • Handle: RePEc:aka:soceco:v:41:y:2019:i:4:p:523-542
    Note: This research was supported by the project EFOP-3.6.2-16-2017-00007, entitled Aspects on the development of intelligent, sustainable and inclusive society: social, technological, innovation networks in employment and digital economy. The project has been supported by the European Union, co-financed by the European Social Fund and the budget of Hungary.
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    References listed on IDEAS

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    More about this item

    Keywords

    Heavily Indebted Poor Countries (HIPC); external debt; capital flight; Panel-Corrected Standard Error (PCSE); fiscal and monetary policies;
    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
    • O22 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Project Analysis

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