The asymmetric and non-linear relationship between capital flight and economic growth nexus

Abstract

The paper sought to explore the effect of capital flight on the economic growth nexus in Ghana. The study used quarterly time series data from 1976 to 2020 to test three hypotheses. The paper used non-linear autoregressive distributive lagged employing unit root test, co-integration test, and Wald test to assess the asymmetrical relationship among the variables. The study posits that both the positive and negative changes in capital flight affect economic growth significantly. Again, the study revealed that capital flight and other macroeconomic variables explain about 75.28% of economic growth. Furthermore, the model can restore the short-run relationship to the dynamic long-long equilibrium at the speed of 35.6%. The study recommends that government economic policymakers build economic confidence by stabilizing economic conditions in the country to reduce the incentives for capital outflows. Further, as a priority, the government must formulate strategies to recover looted public funds by corrupt public officials stacked in foreign accounts and inject them into the economy to boost economic growth.