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A Capital Flight-Growth Nexus in Sub-Saharan Africa: The Role of Macroeconomic Uncertainty

Afees Salisu () and Kazeem Isah ()

No 34, Working Papers from Centre for Econometric and Allied Research, University of Ibadan

Abstract: In this paper, we investigate capital flight-growth nexus and the role of macroeconomic uncertainty in 28 Sub-Saharan African countries for the period 1986 to 2010. We utilize the newly updated estimates of capital flight from SSA by Boyce and Ndikumana (2012). Using heterogeneous panel methods, we find that the adverse effects of capital flight on growth of SSA seem incontrovertible and these effects may be escalated by macroeconomic uncertainty. In addition, capital flight has more devastating effects on long run growth of the oil exporting region than their non-oil counterpart when confronted with macroeconomic uncertainty. We also establish that the inflow of foreign direct investment and foreign aid are not adequate to compensate for capital flight from SSA. On this basis, fiscal and monetary authorities need to show serious commitments towards addressing the prevalent macroeconomic uncertainty in SSA to mitigate its influence on capital flight and growth in the region.

Keywords: Capital flight; Macroeconomic uncertainty; Growth; Sub-Saharan Africa (SSA); Heterogeneous panels (search for similar items in EconPapers)
JEL-codes: C23 F21 F32 O40 O55 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-afr and nep-mac
Date: 2017-11
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