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The capital flight \\"problem.\\"

David Gordon () and Ross Levine ()

No 320, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

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: Developing countries; Capital movements (search for similar items in EconPapers)
Date: 1988, Revised 1988
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