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Flight Capital as a Portfolio Choice

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  • Anke Hoeffler
  • Catherine A Pattillo
  • Paul Collier

Abstract

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.

Suggested Citation

  • Anke Hoeffler & Catherine A Pattillo & Paul Collier, 1999. "Flight Capital as a Portfolio Choice," IMF Working Papers 99/171, International Monetary Fund.
  • Handle: RePEc:imf:imfwpa:99/171
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    References listed on IDEAS

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    1. Eaton, Jonathan, 1987. "Public Debt Guarantees and Private Capital Flight," World Bank Economic Review, World Bank Group, vol. 1(3), pages 377-395, May.
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    Citations

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    Cited by:

    1. Ndikumana, Leonce & Boyce, James K., 2003. "Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries," World Development, Elsevier, vol. 31(1), pages 107-130, January.
    2. Stefan Dercon (QEH), "undated". "Globalization and Marginalization in Africa: Poverty, Risk and Vulnerability in rural Ethiopia," QEH Working Papers qehwps147, Queen Elizabeth House, University of Oxford.
    3. Pasricha, Gurnain Kaur, 2008. "Imperfect Competition in Financial Markets and Capital Controls: A Model and a Test," MPRA Paper 12125, University Library of Munich, Germany.
    4. de la Torre, Augusto & Gozzi, Juan Carlos & Schmukler, Sergio L., 2007. "Stock market development under globalization: Whither the gains from reforms?," Journal of Banking & Finance, Elsevier, vol. 31(6), pages 1731-1754, June.
    5. Easterly, William, 2002. "How Did Heavily Indebted Poor Countries Become Heavily Indebted? Reviewing Two Decades of Debt Relief," World Development, Elsevier, vol. 30(10), pages 1677-1696, October.
    6. Christopher J. Green & Victor Murinde, 2003. "Flow of funds: implications for research on financial sector development and the real economy," Journal of International Development, John Wiley & Sons, Ltd., vol. 15(8), pages 1015-1036.
    7. Zhang, Xiaobo, 2004. "Security is like oxygen," DSGD discussion papers 6, International Food Policy Research Institute (IFPRI).
    8. 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.
    9. Bodil O. Hansen & Hans Keiding, 2004. "Financial Intermediation, Moral Hazard, And Pareto Inferior Trade," Economia, ANPEC - Associação Nacional dos Centros de Pósgraduação em Economia [Brazilian Association of Graduate Programs in Economics], vol. 5(2), pages 189-219.
    10. Hansen, Bodil Olai & Keiding, Hans, 2006. "Financial Intermediation, Moral Hazard, And Pareto Inferior Trade," Working Papers 07-2004, Copenhagen Business School, Department of Economics.
    11. Ian Goldin & Kenneth Reinert, 2005. "Global capital flows and development: A Survey," The Journal of International Trade & Economic Development, Taylor & Francis Journals, vol. 14(4), pages 453-481.
    12. Maswana, Jean-Claude, 2006. "Economic Development Patterns and Outcomes in Africa and Asia," MPRA Paper 5551, University Library of Munich, Germany.
    13. Léonce Ndikumana, 2003. "Capital Flows, Capital Account Regimes, and Foreign Exchange Rate Regimes in Africa," Working Papers wp55, Political Economy Research Institute, University of Massachusetts at Amherst.
    14. Beja Jr, Edsel, 2010. "Balance of Payments-consistent unreported flows," MPRA Paper 21699, University Library of Munich, Germany.
    15. 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.
    16. Andrew Powell & Dilip Ratha & Sanket Mohapatra, 2002. "Capital Inflows and Capital Outflows: Measurement, Determinants, Consequences," Business School Working Papers veinticinco, Universidad Torcuato Di Tella.
    17. Alemayehu Geda, 2006. "Openness, Inequality and Poverty in Africa," Working Papers 25, United Nations, Department of Economics and Social Affairs.
    18. Zhang, Xiaobo, 2004. "Security Is Like Oxygen: Evidence From Uganda," 2004 Annual meeting, August 1-4, Denver, CO 20384, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    19. Léonce Ndikumana, 2001. "Financial Markets and Economic Development in Africa," Working Papers wp17, Political Economy Research Institute, University of Massachusetts at Amherst.
    20. Gunter, Frank R., 2004. "Capital flight from China: 1984-2001," China Economic Review, Elsevier, vol. 15(1), pages 63-85, January.

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