Robbing the Riches: Capital Flight, Institutions, and Instability

BySweta Chaman Saxena, Meenakshi Rishi, Valerie Cerra

October 1, 2005

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

Capital flight may undermine economic growth and the effectiveness of debt relief and foreign aid. This paper is the first attempt to test whether unsound macroeconomic policies or weak institutions lead to capital flight, using panel data for a large set of developing, emerging market and transition countries. In addition, the paper tests the revolving door hypothesis that links debt accumulation and capital flight, and analyzes the contribution of institutions to several channels in this relationship.

Subject: Balance of payments, Capital outflows, Currency crises, Domestic savings, External debt, Financial crises, Foreign direct investment, National accounts

Keywords: Africa, capital flight, capital flight equation, capital flight literature, Capital outflows, Currency crises, debt, debt accumulation, Domestic savings, flight of capital, Foreign Aid, Foreign direct investment, Global, impact capital flight, Institutions, WP

Pages:
39
Volume:
2005
DOI:
https://doi.org/10.5089/9781451862188.001
Issue:
199
Series:
Working Paper No. 2005/199
Stock No:
WPIEA2005199
ISBN:
9781451862188
ISSN:
1018-5941

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