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External Financial Fragility and Capital Flight in Mexico

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  • Julio Lopez

Abstract

Mexico suffered capital flight from 1973 up to 1988 practically without interruption. This paper attempts to evaluate the real cost to Mexico of capital flight. A simple macro-economic model is specified on whose basis an estimate of this cost is attempted. It is found that the cost of this capital flight has been enormous. It gave rise to over-indebtedness when financing was still available from external sources, and it entailed short- and long-term losses of output which the country might have generated. The loss of output was estimated at between 1.5% and 2.5% of the total GDP for the period 1973-1991, between 0.9% and 2% for the 1982-1991 period, and between 3.1% and 5.7% for the 1982-1988 adjustment period.

Suggested Citation

  • Julio Lopez, 1998. "External Financial Fragility and Capital Flight in Mexico," International Review of Applied Economics, Taylor & Francis Journals, vol. 12(2), pages 257-270.
    • Handle: RePEc:taf:irapec:v:12:y:1998:i:2:p:257-270
    DOI: 10.1080/02692179800000006
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    References listed on IDEAS

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    1. Hofman, André A., 1991. "The role of capital in Latin America: a comparative perspective of six countries for 1950-1989," Series Históricas 9579, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
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    Cited by:

    1. Beja, Edsel Jr., 2007. "Capital Flight and Economic Performance," MPRA Paper 4885, University Library of Munich, Germany, revised 12 Sep 2007.
    2. Beja Jr, Edsel, 2010. "Balance of Payments-consistent unreported flows," MPRA Paper 21699, University Library of Munich, Germany.

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