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Asymmetric effects of capital flight on domestic investment in Nigeria: evidence from non-linear autoregressive distributed lag model

Author

Listed:
  • Lionel Effiom

    (University of Calabar)

  • Emmanuel Uche

    (Abia State University)

  • Otei Asuquo Otei

    (University of Calabar)

Abstract

Economic theory prescribes that domestic investment is a decreasing function of capital flight. However, is there a possibility that reversals in capital flight might lead to a decline in investment levels in Nigeria? Put differently, is there a tendency for domestic investment to maintain a downward spiral, a ratchet effect, even in the face of lower levels of capital flight? Extant literature on capital flight in Nigeria is silent on this enquiry. This study is therefore a modest first attempt at investigating these possibilities. Employing the non-linear autoregressive distributed lag model, the study finds evidence of asymmetric impact of capital flight on investment undertaken at the national level. However, investment by subnational governments revealed the existence of symmetry, while overall, total public sector investments (by both States and Federal Governments) indicated the existence of asymmetric effects between positive and negative deviations of capital flight. The paper re-echoes the need for the strengthening of institutions and policy measures that go beyond the conventional in tackling capital flight.

Suggested Citation

  • Lionel Effiom & Emmanuel Uche & Otei Asuquo Otei, 2021. "Asymmetric effects of capital flight on domestic investment in Nigeria: evidence from non-linear autoregressive distributed lag model," SN Business & Economics, Springer, vol. 1(10), pages 1-23, October.
    • Handle: RePEc:spr:snbeco:v:1:y:2021:i:10:d:10.1007_s43546-021-00134-w
    DOI: 10.1007/s43546-021-00134-w
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    More about this item

    Keywords

    Asymmetric effect; Capital flight; Domestic investment; Nonlinear autoregressive distributed lag model; Nigeria;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements

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