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Are default risks causing capital flight in developing countries?
What is capital flight?
Does capital flight increase risk of holding domestic assets?
Is large-scale capital flight a problem in developing countries?
What causes capital flight?
Is private capital flight from developing countries a problem?
Feb 8, 2021 · Capital flight is the outflow of capital from a country due to negative monetary policies, such as currency depreciation, or carry trades in which low interest rate currencies are exchanged for...
The detrimental effects of capital flight cause governments and policymakers to develop effective methods and strategies to prevent the occurrence of the phenomenon. One of the methods of preventing capital outflows is the introduction of capital control policies.
Overall, the concern over massive capital flight from developing economies, particularly those rich in resources, should go well beyond illicit financial flows and consider the seemingly legitimate behavior of corporations and their growing ability to shift profits and minimize the tax base.
Large-scale capital flight is often mentioned as an important cause of the external debt problem of developing countries.
Capital flight, in economics, occurs when assets or money rapidly flow out of a country, due to an event of economic consequence or as the result of a political event such as regime change or economic globalization.
This study first provides estimates of capital flight for a group of developing countries with recent debt-servicing problems, and then discusses the determinants of capital flight and examines measures of the risk of default associated with holding domestic financial instruments.
Capital flight, here defined broadly as money or securities flowing out of a coun-try, can take several forms. One form of capital flight for good reason has received a lot of attention in both academic and pol-icy circles: illicit financial outflows.
