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Capital Flight and Investment Dynamics in Nigeria: A Time Series Analysis (1970-2006)

Author

Listed:
  • Adesoye, A. Bolaji
  • Maku, Olukayode E.
  • Atanda, Akinwande A.

Abstract

This study critically examines the implications of capital flight on investment growth in Nigeria between 1970 and 2006, because of the consequential effect it has on economic growth. The time series data properties incorporated were examined using the Augmented Dickey-Fuller (ADF) unit root test and the results revealed that Investment, capital flight, interest rate and exchange rate were stationary at levels excluding exchange rate found to be integrated at first difference. The Augmented Engle-Granger (AEG) co-integration test employed to investigate the dynamic relationship between capital flight and investment level in Nigeria, revealed that there exist long-run interaction. Though, capital flight was found to exert positive but insignificant effect on investment growth during the review period. While, the short-run dynamic interaction as a result of the structural instability in the long-run was captured by the Error Correction Mechanism (ECM) model which was found inestimable due to the high collinearity existing among the incorporated variables. Policy recommendations were proffered base on the research findings.

Suggested Citation

  • Adesoye, A. Bolaji & Maku, Olukayode E. & Atanda, Akinwande A., 2012. "Capital Flight and Investment Dynamics in Nigeria: A Time Series Analysis (1970-2006)," MPRA Paper 35836, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:35836
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    File URL: https://mpra.ub.uni-muenchen.de/35836/1/MPRA_paper_35836.pdf
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    References listed on IDEAS

    as
    1. Pastor, Manuel Jr., 1990. "Capital flight from Latin America," World Development, Elsevier, vol. 18(1), pages 1-18, January.
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    Cited by:

    1. Lionel Effiom & Alfa Charles Achu & Samuel Etim Edet, 2020. "Capital Flight and Domestic Investment in Nigeria: Evidence From ARDL Methodology," International Journal of Financial Research, International Journal of Financial Research, Sciedu Press, vol. 11(1), pages 348-360, January.
    2. Johnny Nelson & Okoyan Krokeme & Dumani Markjarkson & Ekokeme Tamaroukro Timipere, 2018. "Impact of Capital Flight on Exchange rate in Nigeria," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 8(1), pages 41-50, January.
    3. Dachraoui, Hajer & Smida, Mounir, 2014. "La Mesure de la Fuite des Capitaux et son Impact sur l’Investissement Domestique : Cas des Pays Émergents [Measurement of capital flight and its impact on domestic investment in emerging countries]," MPRA Paper 62740, University Library of Munich, Germany.
    4. 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.

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    More about this item

    Keywords

    Capital flight; Investment behaviour; Long-run; Stationarity; ECM; Cointegration; Nigeria;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • A10 - General Economics and Teaching - - General Economics - - - General

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