Recent estimates of capital flight

Researchers and policymakers have in recent years paid considerable attention to the phenomenon of capital flight. Researchers have focused on four questions: What concept should be used to measure capital flight? What figure for capital flight will emerge, using this measure? Can the occurrence and magnitude of capital flight be explained by certain (economic) variables? What policy changes can be useful to reverse capital flight? The authors focus strictly on presenting estimates of capital flight using a number of alternative methodologies. In their discussion of these methodologies, they show that although the approaches to measuring capital flight differ, the identities used in balance of payment data make them close in final measurement. In particular, the so-called World Bank residual and Dooley methods - presented in the past as very different approaches to measuring capital flight - actually produce similar measurements. The authors discuss the data used for calculating capital flight and the adjustment that must be made. They present aggregate capital flight figures using the various measures for 84 developing countries. The figures show a pattern of increasing capital flight until 1988, followed by a return of flight capital between 1989 and 1991. The authors present regional aggregates of capital flight and rank countries and regions by the level of capital flight relative to GDP. They find that capital flight is more widespread than commonly assumed and, relative to GDP, is rather evenly distributed. The capital flight-GDP Lorenz curve is above the 45-degree line, indicating that countries with a smaller GDP have more capital flight than one would expect if it were distributed proportionate to GDP.