Macroeconomic Impact of Capital Flows in Sub-Saharan Countries, 1980-2008

Weeks examines the probable impact of capital flows, including capital flight, on the macroeconomic performance of sub-Saharan countries over several decades leading up to the global financial crisis. He uses empirical evidence from 31 countries (from Ndikumana and Boyce 2010). His analysis strongly suggests that in the absence of effective regulation of the external account, as is the case in most of the sub-Saharan countries, capital flight is quite substantial, absolutely and compared to other types of resource flows. Capital flight plus official debt service outweigh positive flows in many countries, development assistance and direct foreign investment.The evidence suggests that loss of foreign exchange through debt service and capital flight may in part explain the relatively weak growth of the countries of the sub-Saharan region. National measures to limit capital flight would result in further improvement in economic performance.

 

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