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Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance

Simplice Asongu and Jacinta Nwachukwu ()

No 16/047, Working Papers of the African Governance and Development Institute. from African Governance and Development Institute.

Abstract: This study investigates the effect of governance on capital flight by bundling and unbundling governance. The empirical evidence is based on 37 African countries for the period 1996-2010 and the Generalised Method of Moments. Governance is bundled by principal component analysis, namely: (i) political governance from political stability and ‘voice and accountability’; (ii) economic governance from government effectiveness and regulation quality and (iii) institutional governance from corruption-control and the rule of law. The following findings are established. (i) Political stability and ‘voice and accountability’ reduce capital flight while the collective effect of political governance is not significant. (ii) Economic governance increases capital flight whereas the individual effects of regulation quality and government effectiveness are not significant. (iii) Corruption-control and institutional governance negatively affect capital flight whereas the impact of the rule of law is not significant. (iv) Taken together, Corruption-control is the most effective governance weapon in the fight against capital flight. (v) Priority in the Washington Consensus is more effective at fighting capital flight compared to the Beijing Model. Policy implications are discussed.

Keywords: Econometric modelling; Capital flight; Governance; Africa (search for similar items in EconPapers)
JEL-codes: C50 E62 F34 O55 P37 (search for similar items in EconPapers)
Pages: 27
Date: 2016-04
New Economics Papers: this item is included in nep-afr, nep-law and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

Forthcoming in Journal of Industry, Competition and Trade

Downloads: (external link)
http://www.afridev.org/RePEc/agd/agd-wpaper/Fighti ... -from-Governance.pdf Revised version, 2016 (application/pdf)

Related works:
Journal Article: Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance (2017) Downloads
Working Paper: Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance (2016) Downloads
Working Paper: Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance (2016) Downloads
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