On the Definition and Magnitude of Recent Capital Flight

Robert E. Cumby, Richard M. Levich

NBER Working Paper No. 2275 (Also Reprint No. r1136)
Issued in June 1987
NBER Program(s):International Trade and Investment, International Finance and Macroeconomics

This paper presents a survey of alternative definitions of capital flight and empirical estimates of capital flight utilizing a common database. At the conceptual level, we argue that the definition of capital flight requires a somewhat arbitrary distinction between normal capital flows and those representing capital flight. At the empirical level, our results illustrate the range of estimates of capital flight that are possible and how alternative definitions or databases contribute to the dispersion of estimates. Our results show that for some countries, differences in definitions or databases may have substantial effects, causing some estimates of capital flight to be positive and others negative. We argue that an appropriate definition of capital flight is one that is consistent with the kinds of economic questions under consideration. In theory, capital flight should be viewed within the context of a general equilibrium model. When this is done, capital flight will appear to be a symptom of underlying economic forces rather than a cause of national welfare losses.

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Document Object Identifier (DOI): 10.3386/w2275

Published: Cumby, Robert and Richard Levich. "On the Definition and Magnitude of Recent Capital Flight," Capital Flight and Third World Debt, eds. D. Lessard and J. Williamson. Washington, DC: Institute for International Economics, 1987.

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