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Determinants of Capital Flight: New Panel Evidence from Sub-Saharan Africa (SSA)

Egbulonu, Alloysius J; Bhattarai, Keshab

Authors

Alloysius J Egbulonu



Abstract

This paper examines the determinants of capital flight in sub Saharan African countries (SSA) by introducing corruption as a focus variable in the model. The econometric analysis is based on data from 25 SSA countries over the period 1986-2010 using dynamic panel data estimation methods: Corruption, our focus variable retains its expected positive sign and is statistically significant across all the estimations. The relationship remains very strong even when other standard control variables are taken into account. These results confirm our hypothesis that the nature of corruption in SSA is such that it encourages and promotes capital flight. The empirical findings also indicate that the capital flight in SSA countries is driven mainly by corruption, lag capital flight, external debt, foreign direct investment, and macroeconomic uncertainty. Based on these results, the paper recommends that governments in the region should manage their external debt efficiently, and stabilize their monetary and macroeconomic policies in order to curtail capital flight. Finally, our results are also robust to different specifications, measures of corruption, and econometrics estimation techniques.

Citation

Egbulonu, A. J., & Bhattarai, K. (2020). Determinants of Capital Flight: New Panel Evidence from Sub-Saharan Africa (SSA). Journal of Development Economics and Finance, 1(2), 255-287

Journal Article Type Article
Acceptance Date Oct 12, 2020
Online Publication Date Dec 30, 2020
Publication Date Dec 30, 2020
Deposit Date Feb 15, 2021
Publicly Available Date Feb 16, 2021
Journal Journal of Development Economics and Finance
Publisher ARF India
Peer Reviewed Peer Reviewed
Volume 1
Issue 2
Pages 255-287
Series ISSN ISSN :- 2582-5194
Keywords Corruption; Capital flight; Economic growth; SSA
Public URL https://hull-repository.worktribe.com/output/3724798
Publisher URL http://arfjournals.com/abstract/73666_3_alloysius.pdf

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