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.
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.
Original language | English |
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Pages (from-to) | 255-287 |
Number of pages | 33 |
Journal | Journal of Development Economics and Finance |
Volume | 1 |
Issue number | 2 |
Publication status | Published - 30 Dec 2020 |
Keywords
- Economic growth
- Capital flight
- corruption
- panel data econometrics
- sub-Saharan Africa
- International Trade
- Foreign Direct Investment
- Exchange rate and interest rate effects
- External Debt
ASJC Scopus subject areas
- Economics, Econometrics and Finance(all)