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Rethinking the measurement of capital flight: an application to Asian economies

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  • Yingmei Zheng
  • Kam Tang

Abstract

This paper improves on the widely used residual method in order to estimate the magnitude of capital flight in eight Asian economies over the period of 1980–2004. The paper argues that as capital flight is a drain on financial resources for development, it is more appropriate to measure it against the size of the financial market, which can be proxied by money aggregate, in contrast to the common practice of measuring it as a percentage of gross domestic product. Using this more appropriate new measure, we find that capital flight is more severe in some financially underdeveloped countries than has been suggested previously. It is also found that while capital flight could be a dormant sideshow in a benign economic environment, it could have considerable impact on the availability of financial resources when activated.

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  • Yingmei Zheng & Kam Tang, 2009. "Rethinking the measurement of capital flight: an application to Asian economies," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 14(4), pages 313-330.
    • Handle: RePEc:taf:rjapxx:v:14:y:2009:i:4:p:313-330
    DOI: 10.1080/13547860903169308
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    6. Lisa M. Schineller, 1997. "An econometric model of capital flight from developing countries," International Finance Discussion Papers 579, Board of Governors of the Federal Reserve System (U.S.).
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    Cited by:

    1. Bienvenido Ortega & Jesús Sanjuán & Antonio Casquero, 2019. "Illicit Financial Flows: Another Road Block to Human Development in Low- and Middle-Income Countries," Social Indicators Research: An International and Interdisciplinary Journal for Quality-of-Life Measurement, Springer, vol. 142(3), pages 1231-1253, April.
    2. Heydari, Hassan & Jariani, Farzaneh, 2020. "Analyzing Effective Factors of Capital Outflow from the Middle East and North African Countries (MENA)," MPRA Paper 104547, University Library of Munich, Germany.

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