Fighting Capital Flight in Africa: Evidence from Bundling and Unbundling Governance

Abstract

This study investigates the effect of governance on capital flight by bundling and unbundling

Governance, capital flight and industrialisation in Africa

“…It is relevant to briefly discuss some critical concerns that may arise in regressors that are derived from initial regressions. As recently shown by Asongu and Nwachukwu (2017) and , the concerns are linked to the efficiency and consistency of estimates on the one hand, and the validity of related inferences, on the other hand. In line with Pagan (1984), whilst two-step estimators are efficient and consistent, only few valid inferences can be apparent.…”

“…First, political governance can be defined as the election and replacement of political leaders (Andrés et al 2015). According to recent literature (Collier et al 2004;Davies 2008;Ndikumana et al 2015;Asongu and Nwachukwu 2017), the political environment has a substantial influence on capital flight because it is related to the damage/loss of assets. Accordingly, in the presence of political instability and violence, it is very likely that investors transfer their capital to economic environments that are associated with lower levels of investment risks.…”

“…Second, good governance has been documented to, inter alia improve the efficient allocation of resources (Fonchingong 2014), consolidate the foundations of social change (Efobi 2015), decrease capital flight (Asongu and Nwachukwu 2017) and boost industrialisation (Nobuyuki 2010). Hence, this study is particularly relevant in the light of Africa's lagging position in industrialisation.…”

“…Hence, the positioning of this study departs from the broader contemporary literature on capital flight in Africa. The strand of the literature closest to this positioning has established capital flight to originate from poor governance (Christensen 2011;Gankou et al 2016;Asongu and Nwachukwu 2017). Moreover, whilst there is a substantial body of literature on governance (Musila and Sigué 2010;Kangoye 2013) and capital flight (Ndiaye and Siri 2016;Mpenya et al 2016;Asongu and Amankwah-Amoah 2018) in Africa, we know very little about how governance modulates the effect of capital flight on macroeconomic outcomes.…”

Fighting African Capital Flight: Trajectories, Dynamics and Tendencies

“…The positioning of the research also departs from contemporary literature on capital flight which has been oriented towards, inter alia: the connection between fiscal policy and capital flight (Muchai & Muchai, 2016); lessons on causes and effects of capital flight from Africa (Ndikumana, 2016); the connection between capital flight and public social expenses in Madagascar (Ramiandrisoa & Rakotomanana, 2016) and Congo-Brazzaville (Moulemvo, 2016); insights into relationships between misinvoicing in trade and the flight of capital from Zimbabwe (Kwaramba et al, 2016); the nexus between natural resources and capital flight in Cameroon (Mpenya et al, 2016); how capital flight is related to tax income in Burkina Faso (Ndiaye & Siri, 2016); linkages between terrorism, capital flight and military expenditure (Efobi & Asongu, 2016;Asongu & Amankwah-Amoah, 2018); the institutional environment on the nexus between capital flows and capital flight (Gankou et al, 2016); the bundling and unbundling of institutions in the fight against capital flight (Asongu & Nwachukwu, 2017) and how terrorism sustains the addiction to capital flight .…”