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Determining illicit financial outflows from sixty developing countries

Author

Listed:
  • Matiur Rahman
  • Muhammad Mustafa
  • Lonnie Turpin

Abstract

Purpose - This paper aims to empirically explore the effects of globalization, corruption perception, political stability, macroeconomic vulnerability and gross domestic savings on illicit financial outflows of 60 developing countries from 2004 to 2013. Design/methodology/approach - Pedroni’s heterogeneous panel data methodology for co-integration is applied. Panel unit root tests reveal non-stationarity of each variable in level, and a battery of seven panel co-integration tests largely confirm long-run equilibrium relationship among the variables under study. Findings - The panel vector error correction model estimates show that variables tend to converge toward long-run equilibrium at a very slow pace amid some short-term random fluctuations. At the same time, political stability reduces illicit financial outflows. Originality/value - There are enhancing impacts of globalization, corruption perception, macroeconomic vulnerability and domestic gross savings on illicit financial outflows. Political stability dampens such outflows. To the authors’ knowledge, such studies are either very scant or non-existent.

Suggested Citation

  • Matiur Rahman & Muhammad Mustafa & Lonnie Turpin, 2018. "Determining illicit financial outflows from sixty developing countries," Journal of Financial Economic Policy, Emerald Group Publishing Limited, vol. 11(1), pages 62-81, October.
    • Handle: RePEc:eme:jfeppp:jfep-12-2017-0120
    DOI: 10.1108/JFEP-12-2017-0120
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    Citations

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    Cited by:

    1. Segun Thompson Bolarinwa & Olawale Akinyele & Xuan Vinh Vo, 2021. "Determinants of nonperforming loans after recapitalization in the Nigerian banking industry: Does efficiency matter?," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1509-1524, September.

    More about this item

    Keywords

    Financial markets and the macroeconomy; Globalization; F30; F31; F32;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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