Open AccessDeterminants of Capital Flight In Ghana
Author(s) -
Richmond Forson,
Camara Kwesi Obeng,
William Gabriel BrafuInsaidoo
Publication year - 2017
Publication title -
journal of business and enterprise development
Language(s) - English
Resource type - Journals
ISSN - 2026-500X
DOI - 10.47963/jobed.2017.06
Subject(s) - capital flight , distributed lag , interest rate , transparency (behavior) , short run , economics , debt , monetary economics , external debt , capital (architecture) , real interest rate , corporate governance , financial system , macroeconomics , finance , market economy , history , archaeology , political science , law , econometrics , incentive
The study investigated the short-run and long-run determinants of capital flight in Ghana using the auto-regressive distributed lag (ARDL) estimation technique. The long-run and short-run results show that real GDP growth rate, higher domestic real interest rate over foreign interest rate, financial development, good governance and strong property rights reduce capital flight, while external debt to GDP leads to increase in capital flight in Ghana. However, lagged external debt to GDP and lagged financial development had negative and positive effect respectively in the short-run. The study recommends that government should adopt more pro-growth policies and resort to domestic borrowing to reduce external debt. The Central Bank of Ghana should improve on the development of the financial sector and ensure competitive domestic interest rates. It is also recommended that Public Accounts Committee (PAC) in Ghana should continue to ensure accountability and transparency to strengthen the interest of domestic investors.