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Capital Inflows and Capital Outflows: Measurement, Determinants, Consequences

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Author Info
Andrew Powell
Dilip Ratha
Sanket Mohapatra

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Abstract

This paper develops new estimates of capital outflows and is the first, to our knowledge, to analyze the determinants, consequences and inter-relationship between inflows and outflows. Given the dynamics and individual country effects, we use a panel-VAR and find that inflows and outflows are inter-related, that lower inflows/higher outflows lead to lower growth, and among other effects to a higher fiscal deficit, which feeds back to lower inflows/higher outflows. These results provide evidence of vicious and virtuous cycles. We find no strong evidence that official flows crowd-in private ones. We conclude it is particularly important for developing countries to maintain prudent policies, and especially adequate fiscal discipline, to avoid vicious and reinforce virtuous cycles.

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File URL: http://www.utdt.edu/departamentos/empresarial/cif/pdfs-wp/wpcif-072002.pdf
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Publisher Info
Paper provided by Universidad Torcuato Di Tella in its series Business School Working Papers with number veinticinco.

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Length: 52 pages
Date of creation: Aug 2002
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Handle: RePEc:udt:wpbsdt:veinticinco

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Terry Sicular, 1998. "Capital Flight and Foreign Investment: Two Tales From China and Russia," The World Economy, Blackwell Publishing, vol. 21(5), pages 589-602, 07. [Downloadable!] (restricted)
    Other versions:
  2. Menzie D. Chinn & Michael P. Dooley & Sona Shrestha, 1999. "Latin America and East Asia in the Context of an Insurance Model of Currency Crises," NBER Working Papers 7091, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  3. A. Abalkin & J. Whalley, 1999. "The Problem of Capital Flight from Russia," The World Economy, Blackwell Publishing, vol. 22(3), pages 421-444, 05. [Downloadable!] (restricted)
  4. Simeon Inidayo Ajayi, 1997. "An Analysis of External Debt and Capital Flight in the Severely Indebted Low Income Countries in Sub-Saharan Africa," IMF Working Papers 97/68, International Monetary Fund.
  5. Michael P. Dooley & Kenneth M. Kletzer, 1994. "Capital Flight, External Debt and Domestic Policies," NBER Working Papers 4793, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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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.). [Downloadable!]
  7. Alesina, Alberto & Tabellini, Guido, 1989. "External debt, capital flight and political risk," Journal of International Economics, Elsevier, vol. 27(3-4), pages 199-220, November. [Downloadable!] (restricted)
    Other versions:
  8. Eggerstedt, Harald & Hall, Rebecca Brideau & Van Wijnbergen, Sweder, 1995. "Measuring capital flight: A case study of Mexico," World Development, Elsevier, vol. 23(2), pages 211-232, February. [Downloadable!] (restricted)
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  9. Shang-Jin Wei, 2000. "Local Corruption and Global Capital Flows," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 31(2000-2), pages 303-354. [Downloadable!]
  10. Alesina, Alberto & Perotti, Roberto, 1996. "Income distribution, political instability, and investment," European Economic Review, Elsevier, vol. 40(6), pages 1203-1228, June. [Downloadable!] (restricted)
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  11. kant, C., 1996. "Foreign Direct Investment and Capital Flight," Princeton Studies in International Economics 80, International Economics Section, Departement of Economics Princeton University,.
  12. Prakash Loungani & Paolo Mauro, 2000. "Capital Flight from Russia," IMF Policy Discussion Papers 00/6, International Monetary Fund.
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  13. Catherine A. Pattillo & Paul Collier & Anke Hoeffler, 1999. "Flight Capital as a Portfolio Choice," IMF Working Papers 99/171, International Monetary Fund.
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  14. Nathan Sheets, 1995. "Capital flight from the countries in transition: some theory and empirical evidence," International Finance Discussion Papers 514, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
  15. Chang, P H Kevin & Claessens, Stijn & Cumby, Robert E, 1997. "Conceptual and Methodological Issues in the Measurement of Capital Flight," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 101-19, April. [Downloadable!] (restricted)
  16. Claessens, Stijn & Naude, David, 1993. "Recent estimates of capital flight," Policy Research Working Paper Series 1186, The World Bank. [Downloadable!]
  17. Tornell, Aaron & Velasco, Andes, 1992. "The Tragedy of the Commons and Economic Growth: Why Does Capital Flow from Poor to Rich Countries?," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1208-31, December. [Downloadable!] (restricted)
  18. Lensink, Robert & Hermes, Niels & Murinde, Victor, 1998. "The Effect of Financial Liberalization on Capital Flight in African Economies," World Development, Elsevier, vol. 26(7), pages 1349-1368, July. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ratha, Dilip & Mohapatra, Sanket & Plaza, Sonia, 2008. "Beyond aid : new sources and innovative mechanisms for financing development in Sub-Saharan Africa," Policy Research Working Paper Series 4609, The World Bank. [Downloadable!]
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