Flight Capital as a Portfolio Choice

Author/Editor:

Anke Hoeffler ; Catherine A Pattillo ; Paul Collier

Publication Date:

December 1, 1999

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper sets flight capital in the context of portfolio choice, focusing upon the proportion of private wealth that is held abroad. There are large regional differences in this proportion, ranging from 5 percent in South Asia to 40 percent in Africa. We explain cross-country differences in portfolio choice by variables that proxy differences in the risk-adjusted rate of return on capital. We apply the results to four policy questions: how the East Asian crisis affected domestic capital outflows; herd effects; the effect of the IMF-World Bank debt relief initiative for heavily-indebted poor countries (HIPC) on capital repatriation; and why so much of Africa’s private wealth is held outside the continent.

Series:

Working Paper No. 1999/171

Subject:

English

Publication Date:

December 1, 1999

ISBN/ISSN:

9781451858488/1018-5941

Stock No:

WPIEA1711999

Pages:

33

Please address any questions about this title to publications@imf.org