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Periodical article Periodical article Leiden University catalogue Leiden University catalogue WorldCat catalogue WorldCat
Title:The Role of Capital Flight and Remittances in Current Account Sustainability in Sub-Saharan Africa
Author:Salisu, MohammedISNI
Year:2005
Periodical:African Development Review
Volume:17
Issue:3
Period:December
Pages:382-404
Language:English
Geographic term:Subsaharan Africa
Subjects:capital movements
balance of payments
Economics and Trade
External link:https://onlinelibrary.wiley.com/doi/10.1111/j.1017-6772.2006.00121.x/pdf
Abstract:The principal aim of this paper is to estimate the extent and magnitude of capital flights from Africa and remittance inflows to Africa, and to assess their role in current account sustainability. The paper employs standard methodological approaches to estimating capital flight and remittances for selected African countries and analyses their relationships with current account balance and key economic indicators. The findings from these statistical exercises indicate that the magnitude of capital flight from Africa has increased considerably in recent years, with widespread fluctuations and volatility. The volume of remittances into Africa has increased dramatically but steadily. There is a negative association between balances on current account and capital flight, implying that capital flights tend to worsen current account difficulties. There is a positive relationship between remittances and current account, suggesting that remittances could play an important role in mitigating current account problems. The link between remittances and economic growth is positive, albeit insignificant in the statistical sense, suggesting some evidence of the crucial role of remittances in the economic growth and development process. External debt and capital flight are positively intertwined, providing support for the so-called 'round-tripping' or 'back-to-back' hypothesis. These findings have important policy implications. Bibliogr., sum. [Journal abstract]
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