Flight Capital as a Portfolio Choice
University of Oxford - Department of Economics
University of Oxford - Centre for the Study of African Economies (CSAE)
Catherine A. Pattillo
International Monetary Fund (IMF) - Research Division
IMF Working Paper No. 99/171
This paper sets flight capital in the context of portfolio choice, focusing upon the proportion of private wealth that is held abroad. There are large regional differences in this proportion, ranging from 5 percent in South Asia to 40 percent in Africa. We explain cross-country differences in portfolio choice by variables that proxy differences in the risk-adjusted rate of return on capital. We apply the results to four policy questions: how the East Asian crisis affected domestic capital outflows; herd effects; the effect of the IMF-World Bank debt relief initiative for heavily-indebted poor countries (HIPC) on capital repatriation; and why so much of Africa's private wealth is held outside the continent.
Number of Pages in PDF File: 33
Keywords: Capital flight, portfolio choice
JEL Classification: G11, F21, F32, F34, O16
Date posted: February 14, 2006
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