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Effect of Capital Flight on Investment: Evidence from Emerging Markets

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  • A. Yasemin Yalta

Abstract

Much of the discussion on international capital movements is directed toward studying the effects of foreign capital flows, whereas the implications of resident capital outflows (capital flight) from developing countries remain largely unanalyzed. Using a dynamic panel methodology for twenty-two emerging market economies between 1975 and 2000, this paper investigates the effect of capital flight on investment and how this effect changes with financial liberalization policies. The empirical findings indicate that capital flight reduces private investment dramatically but does not have any effect on public investment. However, no statistically significant impact of financial liberalization on the marginal effect of capital flight on investment is found.

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File URL: http://mesharpe.metapress.com/link.asp?target=contribution&id=945714Q105H41537
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Bibliographic Info

Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

Volume (Year): 46 (2010)
Issue (Month): 6 (November)
Pages: 40-54

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Handle: RePEc:mes:emfitr:v:46:y:2010:i:6:p:40-54

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Web page: http://mesharpe.metapress.com/link.asp?target=journal&id=111024

Related research

Keywords: capital flight; emerging markets; financial liberalization; investment; resident capital outflows;

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Cited by:
  1. A. Yasemin Yalta & A. Talha Yalta, 2011. "Does Financial Liberalization Decrease Capital Flight? A Panel Causality Analysis," Working Papers 1102, TOBB University of Economics and Technology, Department of Economics.
  2. Brada, Josef C. & Kutan, Ali M. & Vukšić, Goran, 2013. "Capital Flight in the Presence of Domestic Borrowing: Evidence from Eastern European Economies," World Development, Elsevier, vol. 51(C), pages 32-46.

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