The Determinants Of Capital Flight: Evidence From MENA Countries

Abstract

This paper examines the determinants of capital flight in seven Middle East and North Africa (MENA) countries during the period of 1981-2008. The results are robust to four econometrics techniques: Ordinary least Squares, Fixed effects, Random Effects, and Seemingly Unrelated Regression Model. The empirical findings indicate that the capital flight in MENA countries is driven mainly by lag capital flight, external debt, foreign direct investment, real GDP growth rate and uncertainty. Based on these results, the paper recommends that governments in these countries should manage their external debt efficiently, and stabilize their monetary and macroeconomic policies in order to staunch capital flight.