اقتصاد باثبات (Jan 2024)
Analyzing the Determinants of Capital Flight in Selected Developing Countries
Abstract
The economic and social consequences of capital flight from developing and underdeveloped countries indicate the importance of this phenomenon. Capital flight causes economic and political uncertainty and can be an obstacle to poverty reduction, economic growth, and domestic and international investments. Also, capital outflow and public and social expenses will decrease, especially in the education, water, health, and sanitation sectors, and economic and social inequalities will become more visible. Also with capital outflow, public and social expenses will decrease, especially in the education, water, health, and sanitation sectors, and economic and social inequalities will become more visible. Knowing more about this phenomenon, such a study can help the literature on this topic in analyzing the determining factors of capital flight from developing countries. In this research, using the Erbe-World Bank method, the amount of capital flight was measured for a sample of 24 developing countries during the period 2000-2021. Then, to investigate and analyze the determinants of capital flight using the generalized method of moments (GMM), the effect of institutional and governance factors and economic factors on capital flight was investigated. The results of the research show that inflation, sanctions, and economic growth fluctuations have positive and significant effects, and the corruption control index and the economic freedom index have negative and significant effects on capital outflow. As a result inflation, sanctions, and economic growth volatility accelerate capital outflow, and improvement in institutional quality and governance reduces capital outflow from developing countries. Countries that are trying to prevent the outflow of capital should review their governance structures and take steps to eliminate internal corruption with greater institutional transparency.
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