Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries
We investigate the determinants of capital flight from 30 sub-Saharan African countries, including 24 countries classified as severely indebted low-income countries, for the period 1970-1996. The econometric analysis reveals that external borrowing is positively and significantly related to capital flight, suggesting that to a large extent capital flight is debt-fueled. We estimate that for every dollar of external borrowing in the region, roughly 80 cents flowed back as capital flight in the same year. Capital flight also exhibits a high degree of persistence in the sense that past capital flight is correlated with current and future capital flight. The growth rate differential between the African country and its OECD trading partners is negatively related to capital flight. We also explore the effects of several other factors - inflation, fiscal policy indicators, the interest rate differential, exchange rate appreciation, financial development, and indicators of the political environment and governance. We discuss the implications of the results for debt relief and for policies aimed at preventing capital flight and attracting private capital held abroad.
|Date of creation:||Aug 2002|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.umass.edu/economicsEmail:
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Paul Collier & Anke Hoeffler, 2004.
"Greed and Grievance in Civil War,"
Development and Comp Systems
- Tabellini, Guido & Alesina, Alberto, 1989.
"External Debt, Capital Flight and Political Risk,"
4553019, Harvard University Department of Economics.
- Alberto Alesina & Guido Tabellini, 1988. "External Debt, Capital Flight and Political Risk," NBER Working Papers 2610, National Bureau of Economic Research, Inc.
- Alesina, Alberto F & Tabellini, Guido, 1988. "External Debt, Capital Flight and Political Risk," CEPR Discussion Papers 253, C.E.P.R. Discussion Papers.
- Alberto Alesina & Guido Tabellini, 1988. "External Debt, Capital Flight and Political Risk," UCLA Economics Working Papers 538, UCLA Department of Economics.
- Fischer, Stanley, 1993.
"The role of macroeconomic factors in growth,"
Journal of Monetary Economics,
Elsevier, vol. 32(3), pages 485-512, December.
- Sebastian Edwards, 1999.
"How Effective Are Capital Controls?,"
Journal of Economic Perspectives,
American Economic Association, vol. 13(4), pages 65-84, Fall.
- Hausman, Jerry A, 1978.
"Specification Tests in Econometrics,"
Econometric Society, vol. 46(6), pages 1251-71, November.
- G. A. Mackenzie, 1989. "Are All Summary Indicators of the Stance of Fiscal Policy Misleading?," IMF Staff Papers, Palgrave Macmillan, vol. 36(4), pages 743-770, December.
- 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.
- Kaplan, Ethan & Rodrik, Dani, 2001.
"Did the Malaysian Capital Controls Work?,"
Working Paper Series
rwp01-008, Harvard University, John F. Kennedy School of Government.
- Hermes, N. & Lensink, R., 2000.
"Capital flight and the uncertainty of government policies,"
00C30, University of Groningen, Research Institute SOM (Systems, Organisations and Management).
- Hermes, Niels & Lensink, Robert, 2001. "Capital flight and the uncertainty of government policies," Economics Letters, Elsevier, vol. 71(3), pages 377-381, June.
- repec:ner:tilbur:urn:nbn:nl:ui:12-3125520 is not listed on IDEAS
- J. K. Boyce & L. Ndikumana, 2001. "Is Africa a Net Creditor? New Estimates of Capital Flight from Severely Indebted Sub-Saharan African Countries, 1970-96," Journal of Development Studies, Taylor & Francis Journals, vol. 38(2), pages 27-56.
- Anke Hoeffler & Catherine A. Pattillo & Paul Collier, 1999.
"Flight Capital As a Portfolio Choice,"
IMF Working Papers
99/171, International Monetary Fund.
- Mohsin S. Khan & Nadeem Ul Haque, 1985. "Foreign Borrowing and Capital Flight: A Formal Analysis (Emprunt extÃ©rieur et Ã©vasion de capitaux: analyse mathÃ©matique) (Endeudamiento externo y fuga de capitales: Un anÃ¡lisis formal)," IMF Staff Papers, Palgrave Macmillan, vol. 32(4), pages 606-628, December.
- Levine, Ross, 1996.
"Financial development and economic growth : views and agenda,"
Policy Research Working Paper Series
1678, The World Bank.
- Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
- Kaufmann, Daniel & Kraay, Aart & Zoido-Lobaton, Pablo, 1999. "Governance matters," Policy Research Working Paper Series 2196, The World Bank.
- Simeon Inidayo Ajayi, 1997. "An Analysis of External Debt and Capital Flight in the Severely Indebted Low Income Countries in Sub-Saharan Africa," IMF Working Papers 97/68, International Monetary Fund.
- Richard N. Cooper, 1999. "Should Capital Controls be Banished?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 89-142.
- Boyce, James K., 1992. "The revolving door? External debt and capital flight: A Philippine case study," World Development, Elsevier, vol. 20(3), pages 335-349, March.
- Lensink, Robert & Hermes, Niels & Murinde, Victor, 1998. "The Effect of Financial Liberalization on Capital Flight in African Economies," World Development, Elsevier, vol. 26(7), pages 1349-1368, July.
- 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.
- Pastor, Manuel Jr., 1990. "Capital flight from Latin America," World Development, Elsevier, vol. 18(1), pages 1-18, January.
- Beck, Thorsten & Levine, Ross & Loayza, Norman, 1999.
"Finance and the sources of growth,"
Policy Research Working Paper Series
2057, The World Bank.
- Anderson, T. W. & Hsiao, Cheng, 1982. "Formulation and estimation of dynamic models using panel data," Journal of Econometrics, Elsevier, vol. 18(1), pages 47-82, January.
When requesting a correction, please mention this item's handle: RePEc:ums:papers:2002-02. 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: (Arslan Razmi)
If references are entirely missing, you can add them using this form.