Terrorism and Capital Flight from Africa
International Economics, 148 (December), pp. 81-94 ( 2016).
African Governance and Development Institute WP/16/022
26 Pages Posted: 7 Jul 2016 Last revised: 12 Dec 2016
Date Written: January 1, 2016
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, transnational, unclear and total terrorisms consistently increase capital flight. Second, for QR, with the exception of transnational terrorism for which a positive effect on capital flight is apparent in the 0.90th quintile, terrorism dynamics affect capital flight in low quintiles of the capital flight distribution. In other words, terrorism increases capital flight for the most part when initial levels of capital flight are low. Policy implications are discussed.
Keywords: Africa; Capital flight; Foreign capital; Terrorism; Violence
JEL Classification: C50; D74; F23; N40; O55
Suggested Citation: Suggested Citation