Article | Open Access | Published: 7 December 2015
Determinants of Capital Flight in Pakistan
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Abstract:
This study investigates the relationship between Capital Flight (CF) and its Determinants: Foreign Direct Investment (FDI), External Debt (ED), Exchange Rate (ER), Foreign Reserves (FR), Gross Domestic Product (GDP) growth, and Inflation (I). Methodology/Sample: CF from Pakistan is measured through the residual method which is the most used method in the literature. This method uses changes in ED, net FDI, Current Account Surplus (CAS), and changes in the FR to calculate the CF from 1971 to 2011. The results of the study show that there exists a relationship between CF and its determinants in the long run whereas no relationship is found in the short run.CF refers to the condition when money, investment, funds, and assets rapidly fly out of the country due to economic and political events that discourage and cause individual investors and companies to lose their confidence in the host country and its economic and political conditions.
Keywords:
CF, Gross Domestic Product, Inflation, Foreign Direct Investment, External Debt, Exchange Rate
Publisher:
ILMA UNIVERSITY
Published:
7 December 2015
Issue:
Issue 2 : Volume 11
E-ISSN:
2409-6520
P-ISSN:
2414-8393
This is an open access article distributed under the terms of the Creative Commons Attribution CC BY 4.0 license, which permits any use, distribution, and reproduction of the work without further permission provided the original author(s) and source are credited.