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Capital Flight in the Presence of Domestic Borrowing: Evidence from Eastern European Economies

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  • Brada, Josef C.
  • Kutan, Ali M.
  • Vukšić, Goran

Abstract

We estimate capital flight from 10 Central and Eastern European countries for the period 1996–2009. Capital flight from the transition economies is mainly an economic phenomenon, driven by differences in interest rates and investors’ perceptions of economic conditions in their countries as well as by the ease with which they are able to obtain funds that can be transferred overseas through domestic loans and capital inflows. Domestic credit expansion is an important source of financing for capital flight. Paradoxically, financial liberalization has fueled rather than reduced capital flight by reducing its costs and increasing the funds that can be moved abroad.

Suggested Citation

  • Brada, Josef C. & Kutan, Ali M. & Vukšić, Goran, 2013. "Capital Flight in the Presence of Domestic Borrowing: Evidence from Eastern European Economies," World Development, Elsevier, vol. 51(C), pages 32-46.
    • Handle: RePEc:eee:wdevel:v:51:y:2013:i:c:p:32-46
    DOI: 10.1016/j.worlddev.2013.05.007
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    4. Simplice A. Asongu & Rexon T. Nting & Evans S. Osabuohien, 2019. "One Bad Turn Deserves Another: How Terrorism Sustains the Addiction to Capital Flight in Africa," Journal of Industry, Competition and Trade, Springer, vol. 19(3), pages 501-535, September.
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    6. Godwin Okafor & Obiajulu Ede, 2023. "Kidnapping rate and capital flight: Empirical evidence from developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2590-2606, July.
    7. Ashis Kumar Pradhan & Gourishankar S. Hiremath, 2017. "The Capital Flight From India: A Case Of Missing Woods For Trees?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(02), pages 365-383, January.
    8. Emmanuel Uche & Lionel Effiom, 2021. "Fighting capital flight in Nigeria: have we considered global uncertainties and exchange rate volatilities? Fresh insights via quantile ARDL model," SN Business & Economics, Springer, vol. 1(6), pages 1-22, June.

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