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On The Determinants Of Capital Flight: A New Approach

Author

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  • Jane Harrigan
  • George Mavrotas
  • Zulkornain Yusop

Abstract

This paper seeks to contribute to the literature on capital flight determinants by employing a new approach to the estimation of capital flight equations over four different measures of capital flight for Malaysian time-series data during the period 1970-96. It improves upon earlier work in the area by employing, for the first time in the relevant empirical literature, relatively recent developments associated with modern time-series analysis, such as cointegration, within the context of a general-to-specific econometric methodology. Empirical findings obtained seem to suggest the importance of macro-economic fundamentals in the capital flight process. The results of econometric analysis reveal the existence of a long-run relationship between capital flight, as variously defined (Dooley's, World Bank's, Private Claim and Balance of Payments measures) on the one hand and exchange rate movements, changes in external debt, real GDP growth and foreign direct investment activities, on the other.

Suggested Citation

  • Jane Harrigan & George Mavrotas & Zulkornain Yusop, 2002. "On The Determinants Of Capital Flight: A New Approach," Journal of the Asia Pacific Economy, Taylor & Francis Journals, vol. 7(2), pages 203-241.
    • Handle: RePEc:taf:rjapxx:v:7:y:2002:i:2:p:203-241
    DOI: 10.1080/13547860220134824
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    References listed on IDEAS

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    1. Robert E. Cumby & Richard M. Levich, 1987. "On the Definition and Magnitude of Recent Capital Flight," NBER Working Papers 2275, National Bureau of Economic Research, Inc.
    2. Dooley, Michael & Helkie, William & Tryon, Ralph & Underwood, John, 1986. "An analysis of external debt positions of eight developing countries through 1990," Journal of Development Economics, Elsevier, vol. 21(2), pages 283-318, May.
    3. kant, C., 1996. "Foreign Direct Investment and Capital Flight," Princeton Studies in International Economics 80, International Economics Section, Departement of Economics Princeton University,.
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    Cited by:

    1. Ljungwall, Christer & Wang, Zijian, 2008. "Why is capital flowing out of China?," China Economic Review, Elsevier, vol. 19(3), pages 359-372, September.
    2. Yin‐Wong Cheung & XingWang Qian, 2010. "Capital Flight: China's Experience," Review of Development Economics, Wiley Blackwell, vol. 14(2), pages 227-247, May.
    3. Letete Emmanuel & Sarr Mare, 2017. "Working Paper 275 - Illicit Financial Flows and Political Institutions in Kenya," Working Paper Series 2392, African Development Bank.
    4. Tatiana PETROVA & Victoria IORDACHI & Dorina CLICHICI, 2017. "Assessment Of Illegal Capital Flows In The Republic Of Moldova," ECONOMY AND SOCIOLOGY: Theoretical and Scientifical Journal, Socionet;Complexul Editorial "INCE", issue 1-2, pages 95-102.
    5. Josef Brada & Ali Kutan & Goran Vukšić, 2011. "The costs of moving money across borders and the volume of capital flight: the case of Russia and other CIS countries," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 147(4), pages 717-744, November.
    6. Yuanyuan Hao, 2023. "The dynamic relationship between trade openness, foreign direct investment, capital formation, and industrial economic growth in China: new evidence from ARDL bounds testing approach," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-11, December.
    7. Abu Bakarr Tarawalie & Talatu Jalloh, 2021. "Determinants of Capital Flight in Post War Sierra Leone: An Empirical Analysis," International Journal of Economics and Financial Issues, Econjournals, vol. 11(2), pages 108-116.
    8. Godwin Okafor & Obiajulu Ede, 2023. "Kidnapping rate and capital flight: Empirical evidence from developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2590-2606, July.
    9. Beja, Edsel Jr., 2007. "Capital Flight and Economic Performance," MPRA Paper 4885, University Library of Munich, Germany, revised 12 Sep 2007.
    10. Ashis Kumar Pradhan & Gourishankar S. Hiremath, 2017. "The Capital Flight From India: A Case Of Missing Woods For Trees?," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 65(02), pages 365-383, January.
    11. Edsel L. Beja, Jr., 2006. "Revisiting the Revolving Door: Capital Flight from Southeast Asia," Working Papers 16, United Nations, Department of Economics and Social Affairs.
    12. Heydari, Hassan & Jariani, Farzaneh, 2020. "Analyzing Effective Factors of Capital Outflow from the Middle East and North African Countries (MENA)," MPRA Paper 104547, University Library of Munich, Germany.
    13. Mavrotas, George & Vinogradov, Dmitri, 2007. "Financial sector structure and financial crisis burden," Journal of Financial Stability, Elsevier, vol. 3(4), pages 295-323, December.
    14. Brada, Josef C. & Kutan, Ali M. & Vukšić, Goran, 2013. "Capital Flight in the Presence of Domestic Borrowing: Evidence from Eastern European Economies," World Development, Elsevier, vol. 51(C), pages 32-46.

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