Determinants of Capital Flight in Ghana

Journal of Business and Enterprise Development; Vol. 7, (2017), PP 151-180

30 Pages Posted: 17 Jul 2017  

Richmond Forson

University of Cape Coast - Department of Economics

Kwasi Camara Obeng

University of Cape Coast - Department of Economics

William Brafu-Insaidoo

University of Cape Coast - Department of Economics

Date Written: 2017

Abstract

The study investigated the short-run and long-run determinants of capital flight in Ghana using the autoregressive distributed lag (ARDL) estimation technique. The long-run and short-run results show that real GDP growth rate, higher domestic real interest rate over foreign interest rate, financial development, good governance and strong property rights reduce capital flight, while external debt to GDP leads to increase in capital flight in Ghana. However, lagged external debt to GDP and lagged financial development had negative and positive effect respectively in the short-run. The study recommends that government should adopt more pro-growth policies and resort to domestic borrowing to reduce external debt. The Central Bank of Ghana should improve on the development of the financial sector and ensure competitive domestic interest rates. It is also recommended that Public Accounts Committee (PAC) in Ghana should continue to ensure accountability and transparency to strengthen the interest of domestic investors.

Keywords: Capital, Portfolio, Autoregressive, distributed, lag

JEL Classification: C32, F21, F 0, G11

Suggested Citation

Forson, Richmond and Obeng, Kwasi Camara and Brafu-Insaidoo, William, Determinants of Capital Flight in Ghana (2017). Journal of Business and Enterprise Development; Vol. 7, (2017), PP 151-180 . Available at SSRN: https://ssrn.com/abstract=2999723

Richmond Forson (Contact Author)

University of Cape Coast - Department of Economics ( email )

Central +233
Ghana

Kwasi Camara Obeng

University of Cape Coast - Department of Economics ( email )

C-DAMAA
Uniersity of Cape Coast
Cape Coast, +233246385881 +233
Ghana

William Brafu-Insaidoo

University of Cape Coast - Department of Economics ( email )

C-DAMAA
Uniersity of Cape Coast
Cape Coast, +233246385881 +233
Ghana

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