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In this article we propose a methodology for the calculation of an international reserves variation threshold that defines the lending decisions of international creditors to developing countries. If the change in net international reserves of the borrowing variation is above that of the threshold, the creditors are willing to lend more. Otherwise, if that change is below the threshold, there will be capital flight. Such a threshold depends on the stocks of debt and international reserves, as well as on the perception of the default risk of the country to honour its debts. Using that threshold, we perform a counterfactual exercise to calculate the time series of international reserve levels that minimize the total cost of reserves holding, namely, the cost of possible illiquidity of the country plus the opportunity cost of holding international reserves. We illustrate the methodology by applying it to five Latin American countries: Argentina, Brazil, Chile, Mexico and Peru.

Over the years, capital flight is a major concern for the countries where institutional quality is severely deficient. Almost all the literature emphasized the role of institutional quality on development. However, a possible question still remains unsettled what would be the optimum or threshold level of institutional quality that would create a milieu of least possible capital flight. The purpose of this study is to find the threshold value of institutional quality indicators and its impact on the capital flight of Bangladesh. Using the ICRG and WGI governance data over the period 1989 to 2016, the nonlinear regression proved that up to certain threshold level of institutional quality, interest rate differential reduces while economic growth stimulates net capital flight (NCF) of Bangladesh. Additionally, up to a certain threshold, level of corruption and interest rate differential lower NCF while beyond that level no effect exists. However, none of those independent variables affects NCF whenever the role of government stability threshold is considered.

This paper examines how macroeconomic variables, such as interest rate differences, inflation, exchange rates, economic growth and external debt growth, affect capital flight in the ASEAN-8 countries. We apply a panel data model with fixed effect estimation for the data for eight countries from the period 1994 to 2018. We use the residual approach used by the World Bank to measure the value of capital flight. The results show that the interest rate differences, exchange rates, economic growth and foreign debt growth had a positive and significant effect on outward capital flight. A further implication of this finding is that the interest rate differences, exchange rate, economic growth and foreign debt growth are factors that trigger an increase in capital outflow in the ASEAN-8 countries. Nonetheless, inflation rate is not considered to be the main factor influencing capital flight, as average inflation in the ASEAN-8 countries remains relatively stable. This paper will be beneficial for policymakers in the ASEAN-8 countries and encourage them to constantly pay attention to these four variables, as they significantly influence capital flight, whereas they can disregard the impact of the inflation variable that is not significant in influencing capital flight.

The implementation of investment policy in the regions in the context of decentralization in Ukraine is one of the key directions of state policy that ensures the development of the infrastructure of the regions, an increase in the level of their production potential, an increase in the level of life of territorial communities and city residents. The study of the mechanisms of investment development of regions in the national science «Public administration and administration» cannot be studied without studying the trends and their features. The author of the article examines research on investment development of regions from the point of view of state and administrative principles. The features of the implementation of investment policy in the regions in the context of decentralization in Ukraine are revealed. the author gives numerous examples of research on the implementation of investment policy in the regions based on the analysis of scientific works of Ukrainian and foreign scientists, while noting that scientists did not consider the subject of research in the context of decentralization, has its own characteristics. It is proved that there is no common vision of the implementation of investment policy in the regions in the context of decentralization in Ukraine, which makes it difficult to study this topic in the field of science «Public administration and administration». Thus, this issue has not been studied at the state and administrative level, especially in the context of decentralization in Ukraine. However, in the scientific research of domestic and foreign scientists, the issue of investment policy in the regions in the context of decentralization in Ukraine was not investigated, which motivated us to identify trends and features on this issue. The purpose of the article is to study the tendencies and features of the development of investment policy in the regions in the conditions of decentralization in Ukraine on the basis of the analysis of scientific domestic and foreign researches. Analyzing the trends of investment policy in the regions in the context of decentralization in Ukraine, consider the statistics and forecasts of IMF experts, the world average ratio of gross savings to GDP (gross savings rate) in the last two decades of XX century. Ukraine, as it is a country of catching up, needs higher rates of economic growth. Part of the defects of the investment climate of Ukraine built seriously and for a long time into the Ukrainian regional system, is reflected in the inefficiency of the investment policy of individual regions. Distortions in the investment mechanism of the region due to accelerated privatization will continue to lead to the preservation of a wide range of inefficient (from a macroeconomic point of view) owners and thus generate capital flight at any rate of economic growth and any taxes. Thus, one of the ways to increase the efficiency of state investment policy at the regional level is to clearly identify and systematize the problems of the content of the importance and relevance of their solution. This allows to identify the relevant types of problem regions and assess their importance for making specific decisions in the field of improving the investment process in the regions, especially in the field of efficient use of investment resources.

Angola enjoyed a remarkable oil bonanza from 2002 to 2014, as the end of a long-running civil war coincided with a rise in oil production, high world oil prices, and large reconstruction assistance from China. This article takes stock of progress since then, asking whether and how this bonanza benefited Angola's people, what might have happened to all the money, and whether it resulted in changes to Angola's political structure. Many of the same rent-seeking activities as before were evident, but were complemented by a multitude of others. This has lessons for policy-makers studying capital flight and illicit financial flows.

The use of tax havens by multinationals is a pervasive activity in international business. However, we know little about the complementary relationship betweentax haven use and foreign direct investment (FDI) in the developing world. Drawing on internalization theory, we develop a conceptual framework that explores this relationship and allows us to contribute to the literature on the determinants of tax haven use by developed-country multinationals. Using a large, firm-level data set, we test the model and find a strong positive association between tax haven use and FDI into countries characterized by low economic development and extreme levels of capital flight. This paper contributes to the literature by adding an important dimension to our understanding of the motives for which MNEs invest in tax havens and has important policy implications at both the domestic and the international level.

The purpose of this paper is to examine the relationship between capital flight, diamond exports and political governance crisis in the Central African Republic. To achieve this, use is made of multiple correspondence analysis to construct a political governance crisis index, and the Autoregressive Distributed Lag Model and Bound test for co‐integration are employed to establish short‐run and long‐run relationships. The short‐run results show political governance crisis and diamond exports have a significant and negative effect on capital flight. The interaction term between diamonds exports and political governance crisis is found to be positively related to capital flight in the short run. The long‐run equilibrium shows a significant and negative relationship between political governance crisis, diamond exports, and gross domestic product growth even though the interaction between political governance crisis and diamond exports show a positive and significant relationship. The total natural resource rent is found to be positively related to capital flight but not statistically significant. It is then recommended that a combination of stable political governance associated with reducing corruption in public affairs and promoting transparency in the management of the diamond sector be strengthened to effectively reduce the flight of capital.

Indonesia’s open, developing economy fielded shocks due to the Asian financial crisis (AFC) and the global financial crisis (GFC) quite differently. Although the origins of both crises were external, during the AFC the coincidence of financial contagion with domestic political upheaval saw the Indonesian economy collapse. By contrast, during the decade-later GFC, when most nations slumped into recession the Indonesian economy slowed but did not recess, achieving real growth of 6.1% (2008) and 4.5% (2009) and recording one of the world’s best performances for the period. This paper reviews these events and employs numerical modelling of stylized AFC and GFC shocks to show that some of the contrast stems from differences in the states of the global economy during the crises and the compositions of the external shocks in each case. This said, both shocks have capital flight elements and it is shown that the key policy responses include floating the exchange rate and fiscal expansions that are, where necessary, money financed. There is, nonetheless, evidence of evolution in Indonesian macroeconomic policy making between the crises that allowed its strong performance to be sustained.

The Latin American region has experienced many interdependent issues such as financial crises, unsustainable sovereign spreads, sudden stops in capital flows, capital flight and growth rate collapse. This study focuses on identifying the drivers of sovereign bond spreads by focusing on the role of capital flight. It is worthy to note that no prior study has explicitly examined this relationship. Using data on eight Latin American countries during the period 1993–2015 and based on dynamic heterogeneous panel regression as a panel-ARDL model and the Pooled Mean Group (PMG) estimator, important outcomes are found out. First, in the long-run, sovereign bond spreads are influenced by the countries’ local fundamentals as well as global factors, whereas in the short-run it is mainly the global factors that can be identified as drivers. Second, the capital flight, which is the variable of interest, shows a positive effect on sovereign bond spreads. Indeed, in order to strengthen their debt repayment ability, Latin American countries are presumably called upon to curb and prevent the capital flight. This requires implementing various strategies which range from establishing efficient judicial and political institutions to growth-boosting through controlling the macroeconomic factors.

PurposeThe purpose of the study is to investigate the role of disaggregated economic freedom measures in the foreign direct investment (FDI) and human development nexus.Design/methodology/approachThe study uses a panel data of 32 selected African countries from 1996 to 2017. A dynamic ordinary least squares (DOLS) with fixed effects and instrumental variable (IV) econometric techniques was used to address issues of endogeneity and serial correlation commonly associated with panel time series data.FindingsThe Results indicate that FDI without accounting for absorptive factors has a positive but insignificant effect on human development for the selected African countries. However, FDI has a positive and significant effect on human development when interacted with measures of economic freedom such as investment freedom, business freedom and financial freedom. In contrast, yet plausible, FDI has a negative influence when interacted with property rights, trade freedom, government integrity and tax burden.Practical implicationsThe study posits that to attract FDI into Africa with the purpose of improving human development, relevant absorptive capacities such as business, investment and financial freedom environment are critical. However, excessive capital flight and government interference through taxation and abuse of property rights should be controlled if the continent seeks to promote human development through FDI.Originality/valueThe novelty and originality of the study, are evident in the use of disaggregated measures of economic freedom as comprehensive absorptive capacities to examine how they complement FDI to impact on human development in Africa.

This study examined the nexus between capital flight and economic development in Nigeria. The null hypothesis was that capital flight has no significant relationship with economic development in Nigeria. The study used the auto regressive distributed lag (ARDL) method on data obtained from the Central Bank of Nigeria and the World Bank, for the period 1986–2018, to examine the relationship between capital flight and economic development in Nigeria. The study examined the unit root problem and cointegrating properties of the data. The unit root problem was tested for by using the augmented Dickey–Fuller (ADF) and Phillips–Perron (PP) tests. Findings from ARDL showed an inverse relationship exists between capital flight, real exchange rate, and economic development. This implies that the variables contributed significantly to reduce economic development within the study period. However, a positive relationship existed between economic development and adult literacy rate in Nigeria. By implication, improvements made in providing quality and affordable education tend to have a positive impact on economic development in Nigeria. The study concluded that economic development is strongly influenced by capital flight, real exchange, and adult literacy rates in Nigeria. The study, therefore, recommends that government policies to curb capital flight should be introduced and monitored so as to lead to economic development in Nigeria.

PurposeThis study empirically examines the effect of capital controls on the volume and composition of capital flows at aggregated as well as at disaggregated level by different asset classes such as debt, FDI, equity, and derivatives.Design/methodology/approachSeveral dynamic panel SYS-GMM models are employed on two sets of unique data on cross-border capital flows and capital control index along with control variables at aggregated and disaggregated level by different asset classes during 1995–2015 for a sample of 31 Asian economies.FindingsEconometric findings suggest that higher capital controls effectively reduce gross capital flows. The reduction in gross capital flows is largely found to be on account of effectiveness of controls on equity flows. However, the impact of controls on overall debt and derivative flows is found to be insignificant. Further, it was found that an increase in direct capital controls disaggregated by inflow and outflow categories significantly reduced the inflow of debt and equity + FDI flows and outflow of equity + FDI and derivative flows. Finally, the study did not find any substitution effect (due to indirect controls) and net effect on capital flows.Practical implicationsResults of such empirical examination may enable governments in respective countries to pursue prudent and rational capital controls as a shield against capital flight and shock transmission.Social implicationsPreventing capital flight through effective controls has macroeconomic benefits such as maintaining stability in income, growth, interest rate, exchange rate, and employment levels for the society.Originality/valueThe primary contribution of the study is the analysis of effectiveness of capital controls disaggregated by different asset categories such as debt, equity, FDI, and derivatives using two unique recent data sets for a large sample of Asian economies.

The aim of this study is to show the effect of export diversification on capital flight in Cameroon over the 1984-2015 period. The Autoregressive Distributed Lags (ARDL) method is used. The results show that the export diversification promotes capital flight in Cameroon. The main recommendation is to ensure efficiency and transparency in the export diversification process in order to fight corruption, report the net worth of exported goods and fight capital flight.

Since 2015, economic policy in Brazil has given priority to austerity measures geared at securing the confidence of market agents. The shift happened after an election outcome manifested the wish for continuity of redistributive policies, which correspond to social entitlements. The contractionary project was intensified in 2016, especially after the removal of the elected government from office, deepening the divide with the electoral results. Drawing from elements regarding law, economics and international relations, the present essay seeks to approach the tension rising between the ballots and expectations of financial investors in the definition of economic policy, relevant to legal institutions. Desde 2015, a política econômica brasileira passou a priorizar medidas de austeridade destinadas a resgatar a confiança dos mercados. A guinada ocorreu após eleições em que a mensagem majoritária nas urnas havia sido de continuidade de políticas redistributivas, correspondentes a direitos sociais. O projeto de arrocho foi intensificado em 2016, sobretudo após a queda do governo eleito, acentuando o contraste com as urnas. O presente ensaio problematiza, com base em elementos jurídicos, econômicos e das relações internacionais, a tensão estabelecida entre as urnas e as expectativas de investidores financeiros na definição da política econômica, com impacto para as instituições jurídicas.

In this study, it is aimed to determine the relationship between capital flight and selected macroeconomic factors in Turkey between the years 2000-2020. In the study, macroeconomic factors consisting of capital flight and dollar exchange rate, direct investments, current account deficit/surplus, external debt stock and inflation calculated according to the World Bank method were used. Analyzes were made with the Extended Dickey-Fuller (ADF) Unit Root Test, VAR Analysis, Johansen-Juselius Cointegration Test, Granger Causality Test and Variance Decomposition. As a result of the analysis, it has been determined that direct investments and inflation have an effect on capital flight, and capital flight has an effect on direct investments, dollar exchange rate and inflation., Bu çalışmada 2000-2020 yılları arasında Türkiye’de yaşanan sermaye kaçışları ile seçilmiş makroekonomik faktörler arasındaki ilişkiyi tespit etmek amaçlanmıştır. Çalışmada, Dünya Bankası yöntemine göre hesaplanan sermaye kaçışları ve dolar kuru, doğrudan yatırımlar, cari açık/fazla, dış borç stoku ve enflasyondan oluşan makroekonomik faktörler kullanılmıştır. Genişletilmiş Dickey-Fuller (ADF) Birim Kök Testi, VAR Analizi, Johansen-Juselius Eşbütünleşme Testi, Granger Nedensellik Testi ve Varyans Ayrıştırması ile analizler yapılmıştır. Analizler sonucunda doğrudan yatırımlar ve enflasyonun sermaye kaçışları üzerinde, sermaye kaçışlarının da doğrudan yatırımlar, dolar kuru ve enflasyon üzerinde bir etkisi olduğu tespit edilmiştir.

This master thesis studies the effect of government debt, corporate taxation, and inflation rate on the trade misreporting gap. Furthermore, this thesis attempted to replicate and expand the analysis of Kellenberg and Levinson (2019) on the subset of post-Soviet countries on a greater timespan to identify whether a generalized conclusion is applicable for all the developing countries. The data was collected from numerous resources (UN Comtrade, CEPII, World bank, GCR, De Sousa (2012)), with the final sample consisting of 127 countries where the leading trading partner was one of the countries from the post-Soviet union in the timespan between 2002 and 2020. It was found that for the exporting country, the government debt is positively associated with the trade gap, while there is no significant impact of corporate taxes and inflation. On the contrary, for the importer, the smaller the government debt, the larger the trade misreporting gap; the higher corporate taxation has a positive association with the illicit behavior, which can be explained by the incentive to misreport traded value; the inflation rate does not affect the trade reporting gap. Change of the data sample neither significantly affected trade gap distribution nor affected the conclusions of the earlier research.

This paper examines the impact of capital flight on economic growth in Nigeria within the context of the Autoregressive Distributed Lag (ARDL) estimation technique. The study utilizes annual data for the period 1981 to 2019, which was sourced from the Statistical Bulletin of the Central Bank of Nigeria (CBN) and World Bank's World Development Index (WDI) data on Nigeria. The result confirms the existence of cointegration and that capital flight has a negative impact on the economic growth of Nigeria. The study, therefore recommends that government should create a business-friendly environment by increasing its foreign reserve and reducing external indebtedness as well as invest heavily in basic infrastructure to attract FDI.