Publication: Causality between External Debt and Capital Flight in Sub-Saharan Africa
Loading...
Date
2009-09-01
ISSN
Published
2009-09-01
Author(s)
Abstract
Over the past few decades, the foreign liabilities of the majority of countries in Sub-Saharan Africa have grown dramatically, propelling most nations into the status of Highly Indebted Poor Countries, when these liabilities reached unsustainable levels in the 1990s. At the same time, increases in capital flight from the region followed a parallel trend, leading scholars to draw on "revolving door" models to explain the apparent positive covariation of external debt and capital flight in the region. This paper investigates the causality between external debt and capital flight in a cross-section of Sub-Saharan African countries using co-integration and error-correction models. Although dual causality, which is consistent with the revolving door hypothesis, cannot be rejected for the majority of countries, empirical evidence highlights the lead of external debt over capital flight. The significance of error-correction terms points to a long-run co-integrating relationship between external debt and capital flight in a large number of countries.
Link to Data Set
Citation
“Fofack, Hippolyte. 2009. Causality between External Debt and Capital Flight in Sub-Saharan Africa. Policy Research working paper ; no. WPS 5042. © http://hdl.handle.net/10986/4235 License: CC BY 3.0 IGO.”
Other publications in this report series
Publication The Worldwide Governance Indicators(Washington, DC: World Bank, 2024-11-07)This paper provides an overview of the data sources and aggregation methodology for the Worldwide Governance Indicators (WGI). The WGI report six aggregate governance indicators measuring Voice and Accountability, Political Stability and Absence of Violence/Terrorism, Government Effectiveness, Regulatory Quality, Rule of Law, and Control of Corruption in a sample of 214 economies over the period 1996–2023. The aggregate indicators combine information from 35 different existing data sources, capturing subjective perceptions of the quality of various dimensions of governance reported by experts and survey respondents worldwide. The paper briefly discusses how to use reported margins of error when interpreting cross-country and over-time differences in the aggregate indicators. The paper also updates and extends earlier analysis on three key issues relating to the WGI methodology: (a) the effect of correlated perception errors, (b) the robustness of the aggregate indicators to alternative weighting schemes, and (c) the existence on trends in global averages of governance.Publication Yielding Insights(Washington, DC: World Bank, 2024-11-06)This paper addresses the challenge of missing crop yield data in large-scale agricultural surveys, where crop-cutting, the most accurate method for yield measurement, is often limited due to cost constraints. Multiple imputation techniques, supported by machine learning models are used to predict missing yield data. This method is validated using survey data from Mali, which includes both crop-cut and self-reported yield information. The analysis covers several crops, providing insights into the importance of different predictors, including farmer-reported yields and geo-spatial variables, and the conditions under which the approach is valid. The findings show that machine learning-based imputations can provide accurate yield estimates, especially for crops with low intercropping rates and higher commercialization. However, survey-to-survey imputations are less accurate than within-survey imputations, suggesting limitations in extrapolating data across different survey rounds. The study contributes valuable insights into improving cost-efficiency in agricultural surveys and the potential of imputation methods.Publication How Regulations Impact the Labor Market(Washington, DC: World Bank, 2024-11-06)This paper provides an extensive review of the literatures on product and labor market regulations and their effects on labor market outcomes. It uncovers the interdependence of these two types of regulations, an area that has received limited attention in research. The paper highlights why understanding the intricate relationship between product and labor market regulations is crucial for effective policy making and advancement of labor market conditions. The findings strongly discourage adopting uniform policies and advocate for tailored approaches to labor market promotion.Publication A Toxic Threat to Indonesia’s Human Capital(Washington, DC: World Bank, 2024-11-06)About 27,000 Indonesians died of lead poisoning in 2019. Where mandatory lead-free standards are absent, as is the case in Indonesia, lead paint is among the most common sources of poisoning. Tests for lead in interior paint conducted in a nationally representative sample of households in December 2023 found that at least 44.8 percent of Indonesians live in homes with lead paint, rising to at least 57.9 percent among those living in homes with any visible interior paint. Indonesian children are more often at risk than adults, with about 46 percent aged five or younger—about 10.2 million children—living in homes with lead paint. Deteriorating lead paint puts 14.1 percent of children aged five or younger at risk of more severe exposure, with the poorest 40 percent of Indonesians more than twice as likely to report deteriorating lead paint. Calibrating the Integrated Exposure Uptake Biokinetic Model for Lead in Children model to these estimates suggests that lead paint exposure alone may push 21 percent of children aged five or younger over the 5 micrograms per deciliter blood lead threshold, equivalent to 55 percent of Indonesia’s total estimated cases among children in the Global Burden of Disease database. New lead paint continues to accumulate in the environment: tests conducted on the most popular paint varieties on the market found that 77 percent contained unsafe levels of lead. The results show that poisoning risks from lead paint are high and widespread in Indonesia, and that lead contaminated paint supply chains remain dominant.Publication Optimal Public Sector Premium, Talent Misallocation, and Aggregate Productivity(Washington, DC: World Bank, 2024-11-06)This paper develops a tractable general equilibrium model to quantify the aggregate productivity gains from adjusting the public sector premium and the size of the public sector to their optimal levels. In the framework, the optimal size of the public sector is contingent on the efficiency level of public goods in increasing the productivity of the private sector. The model also incorporates an endogenous decision between market and non-market activities for women. The model is calibrated using data from the Arab Republic of Egypt, a country that exhibits a disproportionate share of workers, and women especially, in the public sector. The findings show that, under a conservative value for the efficiency of the public sector, aligning the public sector premium with its optimal level, thus lowering the share of employment in the public sector, results in aggregate efficiency gains of 12 percent for output per worker and 8 percent for total factor productivity. For lower values of the elasticity of private output to public goods, the productivity gains are almost twice as large. The optimal premium is positive for women and approaches zero for men, preventing a shift of mid-high-level skilled women from the public sector to non-market activities and also a contraction of the male entrepreneurial sector. Notably, a reduced female public sector premium fosters greater female labor force participation in market activities through an expansion of the female entrepreneurial sector, which increases the demand for production labor and drives wages up.