IDEAS home Printed from https://ideas.repec.org/a/afj/journl/v20y2018i2p21-44.html
   My bibliography  Save this article

Capital Flight in Africa: An Analysis of Macroeconomic and Institutional Quality Determinants

Author

Listed:
  • Umakrishnan Kollamparambil
  • Diana Gumbo

    (University of Witwatersrand)

Abstract

This study examines the macroeconomic and institutional determinants of capital flight using panel data for 29 Sub-Saharan African Countries from 1996-2010. By using the Arellano–Bover/Blundell– Bond System GMM dynamic estimator, this study effectively addresses both autocorrelation and endogeneity in panel data analysis. The empirical results show hysteresis as a highly significant factor thus reinforcing the notion that capital flight tends to persist over time, secondly; macroeconomic variables like external debt, inflation and economic growth are key determinants of capital flight and; thirdly, institutional quality has a significant non-linear impact on capital flight for developing countries indicating that marginal changes to institutional quality impacts capital flight only in the case of countries with low institutional quality. Lastly, unlike other measures of institutional quality, corruption is not found to be an effective determinant of capital flight. This indicates that the nature rather the level of corruption is more relevant in this regard. Given that past capital flight begets more capital flight, it is important to take care of macroeconomic fundamentals and upgrade institutional quality in order to counter capital flight.

Suggested Citation

  • Umakrishnan Kollamparambil & Diana Gumbo, 2018. "Capital Flight in Africa: An Analysis of Macroeconomic and Institutional Quality Determinants," The African Finance Journal, Africagrowth Institute, vol. 20(2), pages 21-44.
    • Handle: RePEc:afj:journl:v:20:y:2018:i:2:p:21-44
    as

    Download full text from publisher

    File URL: http://www.journals.co.za/ej/ejour_finj.html
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Valdemar J. Undji & Teresia Kaulihowa, 2019. "The Effect of Fiscal Policy on Capital Flight in Namibia," Journal of Economics and Behavioral Studies, AMH International, vol. 11(4), pages 18-31.
    2. Emmanuel Uche & Lionel Effiom, 2021. "Fighting capital flight in Nigeria: have we considered global uncertainties and exchange rate volatilities? Fresh insights via quantile ARDL model," SN Business & Economics, Springer, vol. 1(6), pages 1-22, June.
    3. Sini, Snow & Abdul-Rahim, A.S. & Chin, Lee & Said, Rusmawati & Sulaiman, Chindo, 2022. "Natural resources’ impact on capital flow and conflict relationship in Africa: A novel insight from GMM and quantile regression," Resources Policy, Elsevier, vol. 78(C).

    More about this item

    Keywords

    Capital flight; External Debt; macroeconomic fundamentals; institutional quality;
    All these keywords.

    JEL classification:

    • F29 - International Economics - - International Factor Movements and International Business - - - Other
    • F49 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Other
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • N17 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Africa; Oceania

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:afj:journl:v:20:y:2018:i:2:p:21-44. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Kirk De Doncker (email available below). General contact details of provider: https://edirc.repec.org/data/afrgrza.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.