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Determinants of Capital Flight: An econometric case study of Bangladesh

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  • Imam Alam
  • Rahim Quazi
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    Abstract

    While Bangladesh remains steeped in staggering external debt, it is also concurrently witnessing a substantial outflow of domestic capital. This situation raises serious policy concerns for its development prospects. This paper applies the Bounds testing and the Autoregressive Distributed Lag procedures to confirm the existence of a long-run equilibrium relationship between capital flight and its determinants, and to estimate the long-run and short-run behavior of capital flight from Bangladesh. The estimated results suggest that political instability is the single most significant cause of capital flight from Bangladesh, while increases in corporate income taxes, higher real interest rate differentials between the capital-haven countries and Bangladesh, and lower GDP growth rates also significantly contribute to capital flight.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/713673164
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    Bibliographic Info

    Article provided by Taylor & Francis Journals in its journal International Review of Applied Economics.

    Volume (Year): 17 (2003)
    Issue (Month): 1 ()
    Pages: 85-103

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    Handle: RePEc:taf:irapec:v:17:y:2003:i:1:p:85-103

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    Cited by:
    1. Tang Tuck Cheong, 2003. "Aggregate Import Demand Function For Eighteen Oic Countries: A Cointegration Analysis," IIUM Journal of Economics and Management, IIUM Journal of Economis and Management, vol. 11(2), pages 167-195, December.
    2. Beja, Edsel Jr., 2007. "Capital Flight and Economic Performance," MPRA Paper 4885, University Library of Munich, Germany, revised 12 Sep 2007.
    3. Wai Ching Poon, 2010. "Augmented MCi: AN Indicator Of Monetary Policy Stance For ASEAN-5?," Monash Economics Working Papers 25-10, Monash University, Department of Economics.
    4. Saima Siddiqui & Sameena Zehra & Sadia Majeed & Muhammad Sabihuddin Butt, 2008. "Export-Led Growth Hypothesis in Pakistan: A Reinvestigation Using the Bounds Test," Lahore Journal of Economics, Department of Economics, The Lahore School of Economics, vol. 13(2), pages 59-80, Jul-Dec.
    5. Yeh, Chih-Chuan & Huang, Ho-Chuan (River) & Lin, Pei-Chien, 2013. "Financial structure on growth and volatility," Economic Modelling, Elsevier, vol. 35(C), pages 391-400.
    6. 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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