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31. Capital Flight: Measurement and Drivers

Author:
Léonce Ndikumana, James K. Boyce, and Ameth Saloum Ndiaye
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This paper describes the nature of capital flight, the methodologies used to measure it, and its drivers. The paper presents updated estimates of the magnitude of capital flight from 39 African countries for which adequate data are available for the period 1970-2010. It gives a global context of the problem of capital flight from Africa by providing comparative indicators on capital flight and related flows for other developing regions. The paper undertakes a detailed econometric analysis of the drivers of capital flight from African countries. It explores empirically the role of domestic and external factors in driving capital flight, including structural factors, the macroeconomic environment, governance, risk and returns to investment, capital account openness, and financial development. The first objective of the study is to contribute to the literature by providing the most comprehensive analysis of capital flight from Africa that takes into account economic as well as non-economic dimensions, and recognizes the importance of both the domestic and global contexts. The second objective is to contribute to the policy debate on capital flight both in Africa and globally.
Topic:
Economics, International Political Economy, International Affairs, Global Markets, Global Political Economy, and Capital Flight
Political Geography:
Africa and Global Focus

32. Macroeconomic Impact of Capital Flight in Sub-Saharan Africa

Author:
John Weeks
Publication Date:
09-2014
Content Type:
Working Paper
Institution:
African Economic Research Consortium (AERC)
Abstract:
This paper assesses the impact of capital flight on growth in thirty-one sub-Saharan African countries. It first considers the “macro fundamentals” hypothesis that capital flight would be lower in a country whose government adhered to “sound” macroeconomic policies. Analytical considerations fail to support this hypothesis. Second, it develops a growth estimating equation derived from the Harrod-Domar framework. The growth estimations support the conclusion that capital flight had a major impact on growth over the last three decades, 1980–2010. The negative impact was greatest for the petroleum-exporting countries and those affected by internal conflict, but it was also substantial for the other countries, with a few exceptions.
Topic:
Economics, Markets, Global Markets, Economic Growth, Economic Policy, Macroeconomics, and Capital Flight
Political Geography:
Africa, Sudan, Nigeria, Angola, Chad, Cameroon, Global Focus, Gabon, and Republic of Congo

33. Reinsurance in Brazil: the challenges and opportunities of the opening of the market

Author:
Claudio Contador
Publication Date:
07-2014
Content Type:
Special Report
Institution:
Brazilian Center for International Relations (CEBRI)
Abstract:
The opening of the reinsurance market in Brazil finally took place in 2007, amidst euphoria and great expectations. The process lasted nearly two decades, with little movement, to the great frustration of the companies, international investors and, especially, the domestic insurance market, which was in need of modernization and less government involvement. The exhaustion of the nationalized reinsurance model created in 1939 was evident by the 1990s and became even more visible in that decade, in the face of opportunities for insurance offered by the large investments in infrastructure, and rural, environmental and disaster insurance, among others.
Topic:
International Trade and Finance, Global Markets, Financial Markets, and Global Political Economy
Political Geography:
Brazil and Global Focus

34. Escape from the Commodity Trap: Will the Production Transformation Sustain Productivity, Growth and Jobs?

Author:
John Zysman
Publication Date:
04-2014
Content Type:
Working Paper
Abstract:
The emerging transformation of the production of goods and services is dramatically altering what is produced, where, how, and who captures the value. It creates opportunities and challenges. Part I of this essay examines the transformation of production and its acceleration by Cloud Computing. A first argument is that the transformation of production, including both manufacturing and ICT-enabled services should be our focus. A second argument is that ICT enabled services are a source of distinct value in the economy. Third, it considers the distinct and contradictory challenges facing manufacturing. The fourth argument is that the transformation of production will be accelerated by the emergence of Cloud Computing as the next Information Technology Platform. Part II of the essay makes a few focused policy suggestions and considers several issues policy makers need to consider as they frame policy. The emphasis is on the role of next generation tools and competencies of “places”. The crucial policy question is how to nudge that transformation in the advanced countries toward higher value added, higher skilled, higher wage solutions.
Topic:
Economics, Science and Technology, Communications, and Global Markets
Political Geography:
Global Focus

35. Do Recessions Affect Potential Output?

Author:
Jane T. Haltmaier
Publication Date:
12-2012
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
A number of previous studies have looked at the effect of financial crises on actual output several years beyond the crisis. The purpose of this paper is to examine whether the growth of potential output also is affected by recessions, whether or not they include financial crises. Trend per capita output growth is calculated using HP filters, and average growth is compared for the two years preceding a recession, the two years immediately following a recession peak, and the two years after that. Panel regressions are run to determine whether characteristics of recessions, including depth, length, extent to which they are synchronized across countries, and whether or not they include a financial crisis, can explain the cumulative four-year loss in the level of potential output following an output peak preceding a recession. The main result is that the depth of a recession has a significant effect on the loss of potential for advanced countries, while the length is important for emerging markets. These results imply that the Great Recession might have resulted in declines in trend output growth averaging about 3 percent for the advanced economies, but appear to have had little effect on emerging market trend growth.
Topic:
Economics, Global Recession, Global Markets, and Economic Growth
Political Geography:
Global Focus

36. Friends or Foes? The Stock Price Impact of Sovereign Wealth Fund Investments and the Price of Keeping Secrets

Author:
Jason Kotter and Uger Lel
Publication Date:
08-2008
Content Type:
Working Paper
Institution:
Board of Governors of the Federal Reserve System
Abstract:
This paper examines the stock price impact of 163 announcements of Sovereign Wealth Fund (SWF) investments. We document an average positive risk-adjusted return of 2.1 percent for target firms during two days surrounding SWF acquisition announcements. The announcement effect is both statistically and economically significant. A multivariate analysis shows that the degree of transparency of SWF activities is an important determinant of the market reaction, and both the SWF and the existing shareholders of the target firm benefit from improved SWF disclosure. In addition, target firms’ profitability, growth, and governance do not change significantly in the three-year period following the SWF investment relative to a control sample. These results are robust to a battery of tests. Overall, our findings suggest that SWF investments convey a positive signal to market participants about the target firm, increased SWF transparency
Topic:
International Trade and Finance, Global Markets, Financial Markets, and Investment
Political Geography:
Global Focus