Capital Flight and War

The author provides empirical evidence on the effects of inflation on post-war capital flight flows. He tests the hypothesis that inflation has a positive additional impact on capital flight flows after war. He uses a new panel dataset of 77 developing countries, of which 35 experienced at least one episode of war between 1971 and 2000. The author uses a range of estimation methods and four capital flight measures-Cline, World Bank Residual, Morgan Guarantee, and Dooley. The results consistently support the research hypothesis: Post-war inflation increases annual capital flight flows by about 0.005 to 0.01 percentage points of GDP. This effect is substantial in total at high inflation rates. The implication is that low inflation helps to curb capital flight in post-conflict economies.

Bibliographic Details

Main Author:	Davies, Victor A.B.
Language:	English
Published:	World Bank, Washington, DC 2007-04
Subjects:	ACCOUNTING, ACCRUALS, ASSETS, AVERAGE LEVEL, BANKING SYSTEM, BANKS, BASKET OF GOODS, BENCHMARK, BENCHMARK INTEREST RATE, BLACK MARKET, BLACK MARKET PREMIUM, CAPITAL BASE, CAPITAL CONTROLS, CAPITAL FLIGHT, CAPITAL INFLOWS, CAPITALIZATION, CASH ACCOUNTING, CONSUMER PRICE INDEX, DEBT, DEPENDENT VARIABLE, DEVALUATION, DEVELOPING COUNTRIES, DEVELOPMENT ECONOMICS, DEVELOPMENT REPORT, DIRECT INVESTMENT, DOMESTIC INVESTMENT, DYNAMIC PANEL, ECONOMETRIC ANALYSIS, ECONOMETRICS, ECONOMIC ACTIVITY, ECONOMIC CONSEQUENCES, ECONOMIC DEVELOPMENT, ECONOMIC STUDIES, EMPIRICAL EVIDENCE, EMPIRICAL WORK, EMPLOYMENT, EMPLOYMENT EQUATIONS, ESTIMATION RESULTS, ESTIMATION TECHNIQUES, EXCHANGE RATE, EXOGENOUS VARIABLES, EXPECTED RETURN, EXPORTS, EXTERNAL BORROWING, EXTERNAL DEBT, EXTERNAL FACTORS, FACTOR ENDOWMENTS, FINANCIAL CRISIS, FINANCIAL MARKETS, FLIGHT OF CAPITAL, FOREIGN ASSETS, FOREIGN CAPITAL, FOREIGN CAPITAL FLOWS, FOREIGN DIRECT INVESTMENT, FOREIGN EXCHANGE, FOREIGN INVESTMENT, FORMAL ANALYSIS, FREE TRADE, GDP, HIGH INFLATION, HUMAN CAPITAL, INCOME, INCOME GROWTH, INCOME LEVELS, INFLATION, INFLATION RATE, INFLATION RATES, INFORMATION ASYMMETRY, INTEREST PAYMENTS, INTEREST RATES, INTERNATIONAL DEBT, INTERNATIONAL FINANCE, INTERNATIONAL MONETARY FUND, INVESTMENT INCOME, LAGGED DEPENDENT, LAGGED LEVELS, LDCS, LOW INFLATION, MACROECONOMIC CONDITIONS, MACROECONOMIC ENVIRONMENT, MACROECONOMIC STABILITY, NEGATIVE EFFECT, NOMINAL CAPITAL, OPEN ECONOMY, OPPORTUNITY COST, OVERVALUATION, PENALTIES, PER CAPITA INCOME, POLICY RESEARCH, POLITICAL ECONOMY, PORTFOLIO, PORTFOLIO INVESTMENT, PORTFOLIOS, PRICE LEVELS, PRIVATE CAPITAL, PRODUCTIVITY, PUBLIC DEBT, RATES OF RETURN, REAL EXCHANGE RATE, REDUCING INFLATION, RISK PREMIUMS, SERIAL CORRELATION, TAX POLICY, TAX REVENUES, TRADE REGIME, TRANSACTIONS COSTS, TREASURY BILL, TRUST COMPANY, WEALTH,
Online Access:	http://documents.worldbank.org/curated/en/2007/04/7537885/capital-flight-war https://hdl.handle.net/10986/7046
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