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Risk and Capital Flight in Developing Countries

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  • International Monetary Fund

Abstract

The risks of large capital losses on the domestic assets of developing countries resulting from expropriation, inflation, or devaluations are identified as the major causes of capital flight. The combination of large foreign loans and capital flight from developing countries during the 1970s and early 1980s reflected different perceptions of domestic residents and foreign lenders regarding the risks of holding domestic assets. However, the debt crisis reduced these differences in perceived risks, and resulted in a decline of foreign loans coupled with continuation of capital flight. If sound macroeconomic and structural policies can reduce those risks, they can also stem capital flight.

Suggested Citation

  • International Monetary Fund, 1990. "Risk and Capital Flight in Developing Countries," IMF Working Papers 1990/064, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:1990/064
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    Citations

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    Cited by:

    1. Yin‐Wong Cheung & XingWang Qian, 2010. "Capital Flight: China's Experience," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 227-247, May.
    2. Dachraoui, Hajer & Smida, Mounir & Sebri, Maamar, 2020. "Role of capital flight as a driver of sovereign bond spreads in Latin American countries," International Economics, Elsevier, vol. 162(C), pages 15-33.
    3. David B. Gordon & Ross Levine, 1988. "The capital flight \"problem.\"," International Finance Discussion Papers 320, Board of Governors of the Federal Reserve System (U.S.).

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