IDEAS home Printed from https://ideas.repec.org/p/cui/wpaper/0034.html
   My bibliography  Save this paper

A Capital Flight-Growth Nexus in Sub-Saharan Africa: The Role of Macroeconomic Uncertainty

Author

Listed:
  • Afees A. Salisu

    () (Centre for Econometric and Allied Research, University of Ibadan)

  • Kazeem Isah

    () (Centre for Econometric and Allied Research, University of Ibadan)

Abstract

In this paper, we investigate capital flight-growth nexus and the role of macroeconomic uncertainty in 28 Sub-Saharan African countries for the period 1986 to 2010. We utilize the newly updated estimates of capital flight from SSA by Boyce and Ndikumana (2012). Using heterogeneous panel methods, we find that the adverse effects of capital flight on growth of SSA seem incontrovertible and these effects may be escalated by macroeconomic uncertainty. In addition, capital flight has more devastating effects on long run growth of the oil exporting region than their non-oil counterpart when confronted with macroeconomic uncertainty. We also establish that the inflow of foreign direct investment and foreign aid are not adequate to compensate for capital flight from SSA. On this basis, fiscal and monetary authorities need to show serious commitments towards addressing the prevalent macroeconomic uncertainty in SSA to mitigate its influence on capital flight and growth in the region.

Suggested Citation

  • Afees A. Salisu & Kazeem Isah, 2017. "A Capital Flight-Growth Nexus in Sub-Saharan Africa: The Role of Macroeconomic Uncertainty," Working Papers 034, Centre for Econometric and Allied Research, University of Ibadan.
  • Handle: RePEc:cui:wpaper:0034
    as

    Download full text from publisher

    File URL: http://cear.org.ng/index.php?option=com_docman&task=doc_download&gid=73&Itemid=29
    Download Restriction: no

    References listed on IDEAS

    as
    1. Fofack, Hippolyte, 2009. "Causality between external debt and capital flight in Sub-Saharan Africa," Policy Research Working Paper Series 5042, The World Bank.
    2. Michael P. Dooley & Kenneth M. Kletzer, 1994. "Capital flight, external debt, and domestic policies," Economic Review, Federal Reserve Bank of San Francisco, pages 29-37.
    3. Lensink, Robert & Hermes, Niels & Murinde, Victor, 2000. "Capital flight and political risk," Journal of International Money and Finance, Elsevier, vol. 19(1), pages 73-92, February.
    4. Afees Salisu & Idris Ademuyiwa & Basiru Fatai, 2013. "Modelling the Demand for Money in Sub-Saharan Africa (SSA)," Economics Bulletin, AccessEcon, vol. 33(1), pages 635-647.
    5. Pesaran, M. H. & Shin, Y. & Smith, R. P., 1997. "Pooled Estimation of Long-run Relationships in Dynamic Heterogeneous Panels," Cambridge Working Papers in Economics 9721, Faculty of Economics, University of Cambridge.
    6. Leonce Ndikumana & James Boyce, 2011. "Capital flight from sub-Saharan Africa: linkages with external borrowing and policy options," International Review of Applied Economics, Taylor & Francis Journals, vol. 25(2), pages 149-170.
    7. Le, Quan Vu & Zak, Paul J., 2006. "Political risk and capital flight," Journal of International Money and Finance, Elsevier, vol. 25(2), pages 308-329, March.
    8. Alguacil, M. & Cuadros, A. & Orts, V., 2011. "Inward FDI and growth: The role of macroeconomic and institutional environment," Journal of Policy Modeling, Elsevier, vol. 33(3), pages 481-496, May.
    9. Imam Alam & Rahim Quazi, 2003. "Determinants of Capital Flight: An econometric case study of Bangladesh," International Review of Applied Economics, Taylor & Francis Journals, vol. 17(1), pages 85-103.
    10. Edward F. Blackburne III & Mark W. Frank, 2007. "Estimation of nonstationary heterogeneous panels," Stata Journal, StataCorp LP, vol. 7(2), pages 197-208, June.
    11. Pesaran, M. Hashem & Smith, Ron, 1995. "Estimating long-run relationships from dynamic heterogeneous panels," Journal of Econometrics, Elsevier, vol. 68(1), pages 79-113, July.
    12. 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.
    13. Kevin B. Grier & Ólan T. Henry & Nilss Olekalns & Kalvinder Shields, 2004. "The asymmetric effects of uncertainty on inflation and output growth," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 19(5), pages 551-565.
    14. Claessens, S. & Gooptu, S., 1993. "Portfolio Investment in Developing Countries," World Bank - Discussion Papers 228, World Bank.
    15. David B. Gordon & Ross Levine, 1989. "The ‘Problem’ of Capital Flight—a Cautionary Note," The World Economy, Wiley Blackwell, vol. 12(2), pages 237-252, June.
    16. Vivek Ghosal & Prakash Loungani, 2000. "The Differential Impact of Uncertainty on Investment in Small and Large Businesses," The Review of Economics and Statistics, MIT Press, vol. 82(2), pages 338-343, May.
    17. Marcella Mulino, 2002. "On the determinants of capital flight from Russia," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 30(2), pages 148-169, June.
    18. Maki, Daiki, 2012. "Tests for cointegration allowing for an unknown number of breaks," Economic Modelling, Elsevier, vol. 29(5), pages 2011-2015.
    19. repec:dgr:rugsom:98c34 is not listed on IDEAS
    20. Sala-i-Martin, Xavier, 1997. "I Just Ran Two Million Regressions," American Economic Review, American Economic Association, vol. 87(2), pages 178-183, May.
    21. Peter Phillips & Hyungsik Moon, 2000. "Nonstationary panel data analysis: an overview of some recent developments," Econometric Reviews, Taylor & Francis Journals, vol. 19(3), pages 263-286.
    22. Claessens, Stijn, 1993. "Equity portfolio investment in developing countries : a literature survey," Policy Research Working Paper Series 1089, The World Bank.
    23. Robin L. Lumsdaine & David H. Papell, 1997. "Multiple Trend Breaks And The Unit-Root Hypothesis," The Review of Economics and Statistics, MIT Press, vol. 79(2), pages 212-218, May.
    24. 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.).
    25. Im, Kyung So & Pesaran, M. Hashem & Shin, Yongcheol, 2003. "Testing for unit roots in heterogeneous panels," Journal of Econometrics, Elsevier, vol. 115(1), pages 53-74, July.
    26. Robertson, D & Symons, J, 1992. "Some Strange Properties of Panel Data Estimators," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 7(2), pages 175-189, April-Jun.
    27. Joseph P. Byrne & E. Philip Davis, 2005. "Investment and Uncertainty in the G7," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 141(1), pages 1-32, April.
    28. Martinez-Zarzoso, Inmaculada & Bengochea-Morancho, Aurelia, 2004. "Pooled mean group estimation of an environmental Kuznets curve for CO2," Economics Letters, Elsevier, vol. 82(1), pages 121-126, January.
    29. Aizenman, Joshua & Marion, Nancy P. & Marion, Nancy P., 1993. "Macroeconomic uncertainty and private investment," Economics Letters, Elsevier, vol. 41(2), pages 207-210.
    30. Levin, Andrew & Lin, Chien-Fu & James Chu, Chia-Shang, 2002. "Unit root tests in panel data: asymptotic and finite-sample properties," Journal of Econometrics, Elsevier, vol. 108(1), pages 1-24, May.
    31. Léonce Ndikumana & James Boyce, 2010. "Measurement of Capital Flight: Methodology and Results for Sub-Saharan African Countries," African Development Review, African Development Bank, vol. 22(4), pages 471-481.
    32. Bangake, Chrysost & Eggoh, Jude C., 2012. "Pooled Mean Group estimation on international capital mobility in African countries," Research in Economics, Elsevier, vol. 66(1), pages 7-17.
    33. Claessens, Stijn & Naude, David, 1993. "Recent estimates of capital flight," Policy Research Working Paper Series 1186, The World Bank.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    Capital flight; Macroeconomic uncertainty; Growth; Sub-Saharan Africa (SSA); Heterogeneous panels;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O55 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Africa

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cui:wpaper:0034. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Adeoye Omosebi). General contact details of provider: http://edirc.repec.org/data/ceuibng.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.