Causality between external debt and capital flight in Sub-Saharan Africa
Over the past few decades, the foreign liabilities of the majority of countries in Sub-Saharan Africa have grown dramatically, propelling most nations into the status of Highly Indebted Poor Countries, when these liabilities reached unsustainable levels in the 1990s. At the same time, increases in capital flight from the region followed a parallel trend, leading scholars to draw on"revolving door"models to explain the apparent positive covariation of external debt and capital flight in the region. This paper investigates the causality between external debt and capital flight in a cross-section of Sub-Saharan African countries using co-integration and error-correction models. Although dual causality, which is consistent with the revolving door hypothesis, cannot be rejected for the majority of countries, empirical evidence highlights the lead of external debt over capital flight. The significance of error-correction terms points to a long-run co-integrating relationship between external debt and capital flight in a large number of countries.
|Date of creation:||01 Sep 2009|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (202) 477-1234
Web page: http://www.worldbank.org/
More information through EDIRC
References listed on IDEAS
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.:
- Michael P. Dooley & Kenneth M. Kletzer, 1994.
"Capital Flight, External Debt and Domestic Policies,"
NBER Working Papers
4793, National Bureau of Economic Research, Inc.
- 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.
- Dani Rodrik, 2006.
"Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Bank's Economic Growth in the 1990s: Learning from a Decade of Reform,"
Journal of Economic Literature,
American Economic Association, vol. 44(4), pages 973-987, December.
- Dani Rodrik, 2008. "Goodbye Washington Consensus, Hello Washington Confusion? A Review of the World Banks Economic Growth in the 1990s: Learning from a Decade of Reform," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 55(2), pages 135-156, June.
- Granger, C W J, 1969. "Investigating Causal Relations by Econometric Models and Cross-Spectral Methods," Econometrica, Econometric Society, vol. 37(3), pages 424-38, July.
- Xavier Sala-i-Martin & Arvind Subramanian, 2013.
"Addressing the Natural Resource Curse: An Illustration from Nigeria,"
Journal of African Economies,
Centre for the Study of African Economies (CSAE), vol. 22(4), pages 570-615, August.
- Xavier Sala-i-Martin & Arvind Subramanian, 2003. "Addressing the Natural Resource Curse: An Illustration from Nigeria," NBER Working Papers 9804, National Bureau of Economic Research, Inc.
- Xavier Sala-i-Martín & Arvind Subramanian, 2003. "Addressing the natural resource curse: An illustration from Nigeria," Economics Working Papers 685, Department of Economics and Business, Universitat Pompeu Fabra.
- Arvind Subramanian & Xavier Sala-i-Martin, 2003. "Addressing the Natural Resource Curse: An Illustration From Nigeria," IMF Working Papers 03/139, International Monetary Fund.
- Seema Jayachandran, 2004.
UCLA Economics Online Papers
298, UCLA Department of Economics.
- 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.
- Ndikumana, Leonce & Boyce, James K., 2003.
"Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries,"
Elsevier, vol. 31(1), pages 107-130, January.
- Léonce Ndikumana, 2002. "Public Debts and Private Assets:Explaining Capital Flight from Sub-Saharan African Countries," Working Papers wp32, Political Economy Research Institute, University of Massachusetts at Amherst.
- Léonce Ndikumana & James K. Boyce, 2002. "Public Debts and Private Assets: Explaining Capital Flight from Sub-Saharan African Countries," UMASS Amherst Economics Working Papers 2002-02, University of Massachusetts Amherst, Department of Economics.
- 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.
- 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.
- James Boyce & Léonce Ndikumana, 2008. "New Estimates of Capital Flight from Sub-Saharan African Countries: Linkages with External Borrowing and Policy Options," Working Papers wp166, Political Economy Research Institute, University of Massachusetts at Amherst.
- 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.
- 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.
- Engle, Robert & Granger, Clive, 2015.
"Co-integration and error correction: Representation, estimation, and testing,"
Publishing House "SINERGIA PRESS", vol. 39(3), pages 106-135.
- Engle, Robert F & Granger, Clive W J, 1987. "Co-integration and Error Correction: Representation, Estimation, and Testing," Econometrica, Econometric Society, vol. 55(2), pages 251-76, March.
- Yan Sun, 2004. "External Debt Sustainability in HIPC Completion Point Countries," IMF Working Papers 04/160, International Monetary Fund.
- repec:oup:qjecon:v:106:y:1991:i:3:p:837-50 is not listed on IDEAS
- Hirotugu Akaike, 1969. "Fitting autoregressive models for prediction," Annals of the Institute of Statistical Mathematics, Springer, vol. 21(1), pages 243-247, December.
- Pastor, Manuel Jr., 1990. "Capital flight from Latin America," World Development, Elsevier, vol. 18(1), pages 1-18, January.
When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:5042. 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: (Roula I. Yazigi)
If references are entirely missing, you can add them using this form.