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Creating the illicit capital flows network in Europe – Do the net errors and omissions follow an economic pattern?

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  • Siranova, Maria
  • Tiruneh, Menbere Workie
  • Fisera, Boris

Abstract

This paper uses the Net errors and omissions, a standard measure of illicit capital flows, to create a Europe-wide network of illicit capital flows by the rolling window Granger causality method. In the second stage, we investigate the factors that determine the creation of links among country pairs in the illicit capital flow network by Cragg’s two-stage Tobit model. Our results suggest that the process of link creation is conducive to the long-term interest rate differential, while the frequency of link occurrence is determined by the strength of trade linkages, exposure to FDI flows and differences in economic development associated with overall institutional quality and corporate tax rates.

Suggested Citation

  • Siranova, Maria & Tiruneh, Menbere Workie & Fisera, Boris, 2021. "Creating the illicit capital flows network in Europe – Do the net errors and omissions follow an economic pattern?," International Review of Economics & Finance, Elsevier, vol. 71(C), pages 955-973.
    • Handle: RePEc:eee:reveco:v:71:y:2021:i:c:p:955-973
    DOI: 10.1016/j.iref.2020.10.020
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    2. Suna Şahin, 2022. "Net Errors and Omissions Account Overview: Analysis of Selected Countries (1980-2018)," Journal of Economic Policy Researches, Istanbul University, Faculty of Economics, vol. 9(1), pages 103-120, January.

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    More about this item

    Keywords

    Illicit capital flows; Net errors and omissions; Two-stage tobit model; Financial network;
    All these keywords.

    JEL classification:

    • F2 - International Economics - - International Factor Movements and International Business
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies

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