Flight Capital as a Portfolio Choice
This paper sets flight capital in the context of portfolio choice, focusing upon the proportion of private wealth that is held abroad. There are large regional differences in this proportion, ranging from 5 percent in South Asia to 40 percent in Africa. We explain cross-country differences in portfolio choice by variables that proxy differences in the risk-adjusted rate of return on capital. We apply the results to four policy questions: how the East Asian crisis affected domestic capital outflows; herd effects; the effect of the IMF-World Bank debt relief initiative for heavily-indebted poor countries (HIPC) on capital repatriation; and why so much of Africa’s private wealth is held outside the continent.
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- Alesina, Alberto F & Tabellini, Guido, 1988.
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4793, National Bureau of Economic Research, Inc.
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Elsevier, vol. 40(1), pages 259-292, June.
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- Michael P. Dooley, 1988. "Capital Flight: A Response to Differences in Financial Risks," IMF Staff Papers, Palgrave Macmillan, vol. 35(3), pages 422-436, September.
- 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.).
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