African Economic Research Consortium (AERC)

Established in 1988, AERC is a public not-for-profit organization devoted to the advancement of economic policy research and training. AERC's mission is to strengthen local capacity for conducting independent, rigorous inquiry into the problems facing the management of economies in sub-Saharan Africa. http://www.aercafrica.org/home/index.asp

Library Articles

Macroeconomic Impact of Capital Flight in Sub-Saharan Africa

"This paper assesses the impact of capital flight on growth in thirty-one sub-Saharan African countries. It first considers the “macro fundamentals” hypothesis that capital flight would be lower in a country whose government adhered to “sound” macroeconomic policies. Analytical considerations fail to support this hypothesis. Second, it develops a growth estimating equation derived from the...

Natural Resources and Capital Flight: A Role for Policy?

"This paper investigates the relationship between natural resources and capital flight in the form of tax avoidance from multinational corporations. In particular, it focuses on the spillover effects in terms of tax revenue mobilization and stock market development from the thin capitalization rule, a policy instrument aimed at limiting firm tax avoidance through setting limits on a firm’s...

Governance and Illicit Financial Flows

"Insofar that it corrodes governance, engendering opportunistic crimes, grand corruption lies at the core of the problem of illicit financial flows. We identify at least two likely antagonistic circles in the illicit flow process—a virtuous circle and a vicious circle—both rooted in one common factor, namely, the strategic complementarity between corruption and governance. Also, we consider...

Tax Evasion and Capital Flight in Africa

"Expanding the tax base raises government revenue and is essential for sustainable poverty reduction in African countries. With volatile ODA, FDI, loans, and remittances, domestic resource mobilization via taxes remains a vital source of revenue for African governments. Fighting tax evasion is a significant part of this drive to increase government revenue and reduce vulnerability to shocks...

Illicit Financial Flows and Stolen Assets Value Recovery

"Value recovery of stolen assets is both an enforcement of anti-money laundering laws and a potent weapon against corruption. When obtainable, it represents society’s credible commitment to ensure that “crimes do not pay.” We explore these linkages by reviewing international experiences on the implementation of value recovery. Lessons suggest country-level studies that are more likely to...

Capital Flight, Safe Havens and Secrecy Jurisdictions

"The terms “safe haven” and “secrecy jurisdiction” are arguably more appropriate than “tax haven” or even “offshore financial center” in discussing capital flight. Florida, for example, is thought to be the main destination for capital flight from Latin America, though it is rarely—if ever—listed under either of the last two headings. Most capital flight is thought to reflect the transfer—...

Capital Flight and Institutional Frameworks to Promote Transparency

"The paper has three main objectives. First it identifies the kind of institutional frameworks at the global, regional and country level which have evolved to address the issues of illicit financial flows. Second, it analyzes the factors that have inhibited the efficiency and effectiveness of the frameworks. Third it proposes a way forward in terms of addressing the challenges with a view to...

Strategies for Addressing Capital Flight

"This paper discusses strategies to stem capital flight from African countries. It emphasizes the importance of the distinction between licitly and illicitly acquired capital, and the need to tailor strategies to the specific type of capital flight concerned. Policies to prevent the illegal export of honestly acquired capital and strategies to address both trade-related capital flight and...

Capital Flight: Measurement and Drivers

"This paper describes the nature of capital flight, the methodologies used to measure it, and its drivers. The paper presents updated estimates of the magnitude of capital flight from 39 African countries for which adequate data are available for the period 1970-2010. It gives a global context of the problem of capital flight from Africa by providing comparative indicators on capital flight...

Capital Flight and Flow of Funds

"This paper specifies three asset demand equations in a flow-of-funds framework to underpin the demand for capital flight, domestic money, and foreign debt. The estimation uses data on four groups of African countries over 1970–2010: (1) the entire sample of 39 African countries; (2) South Africa, Algeria, Nigeria, and Egypt (SANE); (3) oil- and natural resource-rich countries; and (4) all...

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