Working Paper

The capital flight \"problem.\"

Abstract: This paper isolates the common themes and policy recommendations found in the capital flight literature, and evaluates their statistical, conceptual, and empirical foundations. We find that there is no basis for presuming a stable link between any measure of capital flight and a nation's growth potential or ability to meet external obligations. Thus, although popular measures of capital flight are occasionally indicative of underlying economic and political problems, \"capital flight\" is not generally useful as a policy target or reliable as a signal of when to intensify or mitigate efforts for policy reforms. Moreover, policies proposed to reduce capital flight and repatriate flight capital may even stymie investment, slow growth, shrink the tax-base, and the lower the country's debt financing capacity.

Keywords: Capital movements; Developing countries;

Bibliographic Information

Provider: Board of Governors of the Federal Reserve System (U.S.)

Part of Series: International Finance Discussion Papers

Publication Date: 1988

Number: 320