The costs of moving money across borders and the volume of capital flight: the case of Russia and other CIS countries |
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Authors: | Josef C Brada Ali M Kutan Goran Vukšić |
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Institution: | (1) W. P. Carey School of Business, Arizona State University, Tempe, AZ, USA;(2) Macedonian Academy of Sciences and Arts, Skopje, Macedonia;(3) Southern Illinois University, Edwardsville, IL, USA;(4) Institute of Public Finance, Zagreb, Croatia |
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Abstract: | We estimate capital flight from seven countries of the Commonwealth of Independent States for the period 1995–2005. In some
countries capital flight is large and growing, but other countries, despite similar macroeconomic and political circumstances,
have little capital flight. We develop a model of capital flight that incorporates costs of moving money to offshore locations
and show that such costs are an important determinant of capital flight. Liberalizing the trade and financial sectors accelerates
capital flight by making it easier to move capital abroad. In the short run, greater regulation rather than external sector
liberalization appears to have more potential to combat capital flight. |
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