Economics(PhD)

Permanent URI for this collection

Now showing 1 - 1 of 1

Essays on International Finance and Economic Growth in Africa
(Addis Ababa University, 2019-06) Addis, Yimer; Scott, Hacker(Prof)
This study attempts to estimate the volume of capital flight from Ethiopia and its determinants, focusing on economic, institutional, and political determinants. Capital flight is estimated at US$ 31 billion over the 1970–2012 period. On average, the country lost around half a billion dollars annually under the ‘Derg’ regime. This amount nearly doubled to US$ 1 billion per annum during the EPRDF regime. The empirical evidence suggests that macroeconomic instability, the degree of financial market deepening, exports, interest rate differentials, political instability, corruption, and debt-creating flows are the most important determinants of capital flight from Ethiopia. The political environment is also found to be crucial. Generally, capital flight was high before violent regime changes and low in the subsequent periods, when regimes were in the process of establishing a firmer grip on power; after this point, however, capital flight began to rise significantly again. The historical analysis points to potential causality running from political factors to capital flight. A strong improvement in economic and political governance will be key to abating the problems of capital flight in Ethiopia.