Capital flight to Germany: Two alternative measures

Abstract

We use two measures to study two capital flight channels for Germany. One measure is based on the concept of trade misinvoicing and one on net claims and liabilities in the Eurosystem of central banks. For both measures, we propose refinements to enhance the assessment of capital flight. We find that capital flight towards Germany via these two channels has been quite sizable in the recent decade and can tally to about 2% of GDP annually. Regarding their determinants, we show that the two capital flight measures are driven by both common and measure-specific factors. Traditional determinants such as covered interest differentials only play a limited role, while crisis-specific factors such as economic policy uncertainty, the ECB collateral policy, as well as currency misalignment are driving factors of the investors' apparent flight-to-safety behavior.

Development aid and illicit capital flight: Evidence from Nepal

“…Trade misinvoicing is a well-established phenomenon that has been used to analyse capital flight patterns in many studies (e.g. Bhagwati, 1964Bhagwati, , 1981Buehn & Eichler, 2011;Cardoso & Dornbusch, 1989;Cheung et al, 2016, 2020De Wulf, 1981Ferrantino et al, 2012;Fisman & Wei, 2004). The underlying modus operandi builds on the illegal issuance of upward or downward manipulated invoices in international (goods) trade.…”

The vulnerable financial issue: Capital flight in Indonesia

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