How Terrorism Explains Capital Flight from Africa

African Governance and Development Institute WP/15/034

22 Pages Posted: 18 Sep 2015

See all articles by Uchenna Efobi

Uchenna Efobi

Covenant University

Simplice Asongu

African Governance and Development Institute

Date Written: September 16, 2015

Abstract

We assess the effects of terrorism on capital flight in a panel of 29 African countries for which data is available for the period 1987-2008. The terrorism dynamics entail domestic, transnational, unclear and total terrorisms. The empirical evidence is based on Generalised Method of Moments (GMM) with forward orthogonal deviations and Quantile regressions (QR). The following findings are established. First, for GMM, domestic, unclear and total terrorisms consistently increase capital flight, with the magnitude relative higher from unclear terrorism. Second, for QR: (i) the effect of transnational terrorism is now positively significant in the top quantiles (0.75th and 0.90th) of the capital flight distribution, (ii) domestic and total terrorisms are also significant in the top quantiles and (iii) unclear terrorism is significant in the 0.10th and 0.75th quantiles. Policy implications are discussed.

Keywords: Capital flight, terrorism, Africa

JEL Classification: C50; D74; F23; N40; O55

Suggested Citation

Efobi, Uchenna and Asongu, Simplice, How Terrorism Explains Capital Flight from Africa (September 16, 2015). African Governance and Development Institute WP/15/034 . Available at SSRN: https://ssrn.com/abstract=2661461 or http://dx.doi.org/10.2139/ssrn.2661461

Uchenna Efobi (Contact Author)

Covenant University ( email )

P.M.B. 1023
Km 10 Idiroko road
Ota, Ogun State 234
Nigeria
+48036273494 (Phone)

Simplice Asongu

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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