External Debt and Capital Flight in the Indian Economy
AbstractThis paper estimates Indian capital flight at US $88 billion (in 1997 dollars) over the 1971-97 period, a sum that is roughly 20% of the US $448 billion real external debt disbursed to the country over the same time period. There is also evidence of a strong year-to-year correlation between debt inflows and flight-capital outflows. The paper explores the nature of this association between capital flight and external debt in the Indian economy. An analysis by Boyce (1992, World Development, 20, pp. 335-349) for the Philippines revealed the presence of contemporaneous bi-directional causality, in other words, a financial revolving door relationship between external debt and capital flight in that economy. The research question addressed by this paper is whether such a financial revolving door relationship exists in India, given its higher level of external indebtedness and lower debt-to-GNP ratio as compared with the Philippines. Utilizing a simultaneous equation model to examine the association between capital flight and external debt in the Indian economy, the paper confirms the existence of a financial revolving door relationship between the two endogenous variables.
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Bibliographic InfoArticle provided by Taylor and Francis Journals in its journal Oxford Development Studies.
Volume (Year): 29 (2001)
Issue (Month): 1 ()
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- Sweta Chaman Saxena & Meenakshi Rishi & Valerie Cerra, 2005. "Robbing the Riches: Capital Flight, Institutions, and Instability," IMF Working Papers 05/199, International Monetary Fund.
- Beja, Edsel Jr., 2007. "Capital Flight and Economic Performance," MPRA Paper 4885, University Library of Munich, Germany, revised 12 Sep 2007.
- Demir, Firat, 2004. "A Failure Story: Politics and Financial Liberalization in Turkey, Revisiting the Revolving Door Hypothesis," World Development, Elsevier, vol. 32(5), pages 851-869, May.
- Beja Jr., Edsel L., 2007. "Brothers in distress: Revolving capital flows of Indonesia, Malaysia, and Thailand," Journal of Asian Economics, Elsevier, vol. 18(6), pages 904-914, December.
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