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A Capital Flight-Growth Nexus in Sub-Saharan Africa: The Role of Macroeconomic Uncertainty

Author

Listed:
  • Afees A. Salisu

    (Centre for Econometric and Allied Research, University of Ibadan)

  • Kazeem Isah

    (Centre for Econometric and Allied Research, University of Ibadan)

Abstract

In this paper, we investigate capital flight-growth nexus and the role of macroeconomic uncertainty in 28 Sub-Saharan African countries for the period 1986 to 2010. We utilize the newly updated estimates of capital flight from SSA by Boyce and Ndikumana (2012). Using heterogeneous panel methods, we find that the adverse effects of capital flight on growth of SSA seem incontrovertible and these effects may be escalated by macroeconomic uncertainty. In addition, capital flight has more devastating effects on long run growth of the oil exporting region than their non-oil counterpart when confronted with macroeconomic uncertainty. We also establish that the inflow of foreign direct investment and foreign aid are not adequate to compensate for capital flight from SSA. On this basis, fiscal and monetary authorities need to show serious commitments towards addressing the prevalent macroeconomic uncertainty in SSA to mitigate its influence on capital flight and growth in the region.

Suggested Citation

  • Afees A. Salisu & Kazeem Isah, 2017. "A Capital Flight-Growth Nexus in Sub-Saharan Africa: The Role of Macroeconomic Uncertainty," Working Papers 034, Centre for Econometric and Allied Research, University of Ibadan.
    • Handle: RePEc:cui:wpaper:0034
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    Cited by:

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    More about this item

    Keywords

    Capital flight; Macroeconomic uncertainty; Growth; Sub-Saharan Africa (SSA); Heterogeneous panels;
    All these keywords.

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

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