Fighting capital flight in Nigeria: have we considered global uncertainties and exchange rate volatilities? Fresh insights via quantile ARDL model

Emmanuel Uche () and Lionel Effiom ()
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Emmanuel Uche: Abia State University
Lionel Effiom: University of Calabar

SN Business & Economics, 2021, vol. 1, issue 6, 1-22

Abstract: Abstract This study aims to fill the observed gap in the literature related to capital flight and its determinants. Following this observation, the main objective of the current effort is to unravel the potential influence of global economic policy uncertainties and exchange rate deviations on capital flight. Annual time series data between 1970 and 2015 were used for empirical investigations through the application of the newly introduced quantile autoregressive distributed lag model. Following this extensive investigation, the following evidence emerged. A long-run relationship exists between global economic uncertainties, exchange rate volatilities, and capital flight in Nigeria. Second, we discover that the effects of exchange rate volatility and global uncertainty are sensitive to different quantiles of capital flight distributions. Third, capital flight shows strong evidence of hysteresis in all quantiles. This makes capital flight a systemic problem as past capital flight induces more capital flight. In addition, we found evidence of long-run distributional asymmetric effects between the past values of capital flight and that of economic growth on capital flight. In addition, exchange rate and GDP, rather than global uncertainty are the major determinants of capital flight in Nigeria in terms of their significant positive long-term impacts on capital flight in all quantiles of capital flight distributions. Therefore, if the fight against capital migration must be won in Nigeria and other countries facing similar challenges, stabilization of the exchange rate, among other things is paramount. In addition, due to the presence of distributional asymmetric effects, a one-size-fits all policy may not be helpful. The overall findings have strong policy implications for the fight against capital flight.

Keywords: Capital flight; Economic uncertainties; Exchange rate volatilities; QARDL; Distributional asymmetry; Nigeria (search for similar items in EconPapers)
JEL-codes: E22 F23 F32 G11 O40 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (7)

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DOI: 10.1007/s43546-021-00082-5

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