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Corruption, political stability and illicit financial outflows in Sub-Saharan Africa

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  • Orkoh, Emmanuel
  • Claassen, Carike
  • Blaauw, Phillip Frederick

Abstract

This paper examines the effect of corruption control and political stability on illicit financial outflows in Sub-Saharan Africa. We use a balanced panel data from the World Bank, United Nations Conference on Trade and Development and Global Financial Integrity on Sub-Saharan African countries covering the period 2005-2014. Our regression estimates reveal that a unit increase in political stability and corruption control reduce illicit financial outflow due to misinvoicing in merchandise trade by an average of US$ 20.5 million and US$ 44.3 million respectively. The results also show that high trade rating, financial sector rating and exchange rates reduce illicit financial outflows while an increase in foreign direct investment and inflation increase illicit financial outflow. We recommend that governments in Sub-Saharan Africa countries must ensure that institutions responsible for fighting corruption and enhancing stable governance are well empowered and given the needed resources to work effectively to reduce corruption to the barest minimum.

Suggested Citation

  • Orkoh, Emmanuel & Claassen, Carike & Blaauw, Phillip Frederick, 2017. "Corruption, political stability and illicit financial outflows in Sub-Saharan Africa," MPRA Paper 89044, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:89044
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    References listed on IDEAS

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    1. Quan Le & Meenakshi Rishi, 2006. "Corruption and Capital Flight: An Empirical Assessment," International Economic Journal, Taylor & Francis Journals, vol. 20(4), pages 523-540.
    2. lahlou, kamal & Mossadak, Anas, 2013. "Empirical Investigation on the Illicit Financial Flows from Mena Region," MPRA Paper 98020, University Library of Munich, Germany.
    3. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 38(2), pages 112-134.
    4. kant, C., 1996. "Foreign Direct Investment and Capital Flight," Princeton Studies in International Economics 80, International Economics Section, Departement of Economics Princeton University,.
    5. Alemayehu Geda & Addis Yimer, 2016. "Capital Flight and its Determinants: The Case of Ethiopia," African Development Review, African Development Bank, vol. 28(S1), pages 39-49, April.
    6. Shang-Jin Wei & Yi Wu, 2002. "Negative Alchemy? Corruption, Composition of Capital Flows, and Currency Crises," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 461-506, National Bureau of Economic Research, Inc.
    7. World Bank, 2017. "World Development Indicators 2017," World Bank Publications - Books, The World Bank Group, number 26447.
    8. Jean†Marie Gankou & Marius Bendoma & Moussé Ndoye Sow, 2016. "The Institutional Environment and the Link between Capital Flows and Capital Flight in Cameroon," African Development Review, African Development Bank, vol. 28(S1), pages 65-87, April.
    9. Daniel Kaufmann, 2003. "Rethinking Governance: Empirical Lessons Challenge Orthodoxy," Macroeconomics 0308007, University Library of Munich, Germany.
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    Cited by:

    1. YENLIDE, Tchablemane, 2021. "Corruption et sorties illicites de capitaux dans les pays de l’Afrique subsaharienne: La démocratie compte-elle vraiment? [Corruption and Illicit Capital Outflows in Sub-Saharan Africa: Does Democr," MPRA Paper 110750, University Library of Munich, Germany.

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    More about this item

    Keywords

    Corruption; political stability; illicit financial outflow; Sub-Saharan Africa;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G3 - Financial Economics - - Corporate Finance and Governance

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