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Robbing the Riches

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  • Sweta Chaman Saxena
  • Meenakshi Rishi
  • Valerie Cerra

Abstract

Capital flight may undermine economic growth and the effectiveness of debt relief and foreign aid. This paper is the first attempt to test whether unsound macroeconomic policies or weak institutions lead to capital flight, using panel data for a large set of developing, emerging market and transition countries. In addition, the paper tests the revolving door hypothesis that links debt accumulation and capital flight, and analyzes the contribution of institutions to several channels in this relationship.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 05/199.

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Length: 39
Date of creation: 01 Oct 2005
Date of revision:
Handle: RePEc:imf:imfwpa:05/199

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Keywords: Capital outflows; capital flight; external debt; debt accumulation; external borrowing; short-term debt; foreign aid; debt relief; domestic savings; long-term debt; currency crises; currency crisis; balance of payments; financial crises; budget balances; capital flows; stock of debt; budget balance; current account; debt relief initiative; repayments; external financing; debt ratio; international lending; government debt; foreign debt; debt ratios; debt crisis; debt servicing; reserve bank; debt ? accumulation; current account surplus; debt burden; total external debt; trade taxes; debt outstanding; debt stock; external finance; current account balance; public debt; debt relief initiatives; currency depreciation; capital accounts; public debts; exchange rate depreciation; capital ? flight; external indebtedness; trade liberalization; debt service; external debt accumulation;

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References

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  1. Mara Faccio, 2006. "Politically Connected Firms," American Economic Review, American Economic Association, American Economic Association, vol. 96(1), pages 369-386, March.
  2. Carmen M. Reinhart & Graciela L. Kaminsky, 1999. "The Twin Crises: The Causes of Banking and Balance-of-Payments Problems," American Economic Review, American Economic Association, American Economic Association, vol. 89(3), pages 473-500, June.
  3. Robert E. Cumby & Richard M. Levich, 1987. "On the Definition and Magnitude of Recent Capital Flight," NBER Working Papers 2275, National Bureau of Economic Research, Inc.
  4. Judson, Ruth A. & Owen, Ann L., 1999. "Estimating dynamic panel data models: a guide for macroeconomists," Economics Letters, Elsevier, Elsevier, vol. 65(1), pages 9-15, October.
  5. Niranjan Chipalkatti & Meenakshi Rishi, 2001. "External Debt and Capital Flight in the Indian Economy," Oxford Development Studies, Taylor & Francis Journals, Taylor & Francis Journals, vol. 29(1), pages 31-44.
  6. Michael P. Dooley & Kenneth M. Kletzer, 1994. "Capital flight, external debt, and domestic policies," Economic Review, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, pages 29-37.
  7. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, Elsevier, vol. 68(1), pages 29-51, July.
  8. Demir, Firat, 2004. "A Failure Story: Politics and Financial Liberalization in Turkey, Revisiting the Revolving Door Hypothesis," World Development, Elsevier, Elsevier, vol. 32(5), pages 851-869, May.
  9. Bhattacharya, Rina, 1999. "Capital flight under uncertainty about domestic taxation and trade liberalization," Journal of Development Economics, Elsevier, Elsevier, vol. 59(2), pages 365-387, August.
  10. Hermes, Niels & Lensink, Robert & Murinde, Victor, 2002. "Flight Capital and its Reversal for Development Financing," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  11. Léonce Ndikumana, 2002. "Public Debts and Private Assets:Explaining Capital Flight from Sub-Saharan African Countries," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp32, Political Economy Research Institute, University of Massachusetts at Amherst.
  12. Lisa M. Schineller, 1997. "A nonlinear econometric analysis of capital flight," International Finance Discussion Papers, Board of Governors of the Federal Reserve System (U.S.) 594, Board of Governors of the Federal Reserve System (U.S.).
  13. Douglass C. North & Robert Paul Thomas, 1970. "An Economic Theory of the Growth of the Western World," Economic History Review, Economic History Society, Economic History Society, vol. 23(1), pages 1-17, 04.
  14. Daron Acemoglu & Simon Johnson & James A. Robinson, 2000. "The Colonial Origins of Comparative Development: An Empirical Investigation," NBER Working Papers 7771, National Bureau of Economic Research, Inc.
  15. Jonathan Eaton, 1987. "Public Debt Guarantees and Private Capital Flight," NBER Working Papers 2172, National Bureau of Economic Research, Inc.
  16. Hermes, N. & Lensink, R., 2000. "Capital flight and the uncertainty of government policies," Research Report 00C30, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
  17. Nickell, Stephen J, 1981. "Biases in Dynamic Models with Fixed Effects," Econometrica, Econometric Society, Econometric Society, vol. 49(6), pages 1417-26, November.
  18. Boyce, James K., 1992. "The revolving door? External debt and capital flight: A Philippine case study," World Development, Elsevier, Elsevier, vol. 20(3), pages 335-349, March.
  19. Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
  20. Lensink, Robert & Hermes, Niels & Murinde, Victor, 1998. "The Effect of Financial Liberalization on Capital Flight in African Economies," World Development, Elsevier, Elsevier, vol. 26(7), pages 1349-1368, July.
  21. Reinhart, Carmen & Kaminsky, Graciela & Lizondo, Saul, 1998. "Leading Indicators of Currency Crises," MPRA Paper 6981, University Library of Munich, Germany.
  22. Author-Name: Jeffrey D. Sachs & John W. McArthur & Guido Schmidt-Traub & Margaret Kruk & Chandrika Bahadur & Michael Faye & Gordon McCord, 2004. "Ending Africa's Poverty Trap," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 35(1), pages 117-240.
  23. Fry, Maxwell J., 1993. "Foreign debt accumulation: financial and fiscal effects and monetary policy reactions in developing countries," Journal of International Money and Finance, Elsevier, Elsevier, vol. 12(4), pages 347-367, August.
  24. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
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Cited by:
  1. Raghbendra Jha & T. Palanivel, 2007. "Resource Augmentation for Meeting the Millennium Development Goals in the Asia Pacific Region," Departmental Working Papers, The Australian National University, Arndt-Corden Department of Economics 2007-02, The Australian National University, Arndt-Corden Department of Economics.

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