Flight Capital as a Portfolio Choice

This article sets flight capital in the context of portfolio choice, focusing on the proportion of private wealth that is held abroad. There are large regional differences in this proportion, ranging from 5 percent in South Asia to 40 percent in Af...

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Bibliographic Details
Main Authors:	Collier, Paul, Hoeffler, Anke, Pattillo, Catherine
Format:	Journal Article
Language:	English en_US
Published:	Washington, DC: World Bank 2014
Subjects:	ACCUMULATION OF DEBTS ARBITRAGE ASSETS BALANCE OF PAYMENTS BANK DEBT BANK POLICY BIASES BONDS BORROWER CAPITAL ACCOUNT CAPITAL BASE CAPITAL FLIGHT CAPITAL FLOW CAPITAL FLOWS CAPITAL INFLOWS CAPITAL MOVEMENTS CAPITAL OUTFLOW CAPITAL OUTFLOWS CAPITAL RATIO CAPITAL REPATRIATION CAPITAL STOCK CAPITAL STOCKS CD CHECKS COMMERCIAL BANKS CONSUMER PRICE INDEX CORRUPTION COUNTRY RISK CREDITORS CRISIS AFFECTED CURRENCY CURRENCY APPRECIATION CURRENCY CRISES CURRENCY MARKETS DEBT DEBT CRISIS DEBT DATA DEBT FORGIVENESS DEBT RATIO DEBT REDUCTION DEBT RELIEF DEBT SERVICE DEBTCAPITAL DEGREE OF RISK DEPOSIT DEPOSITOR DEVELOPING COUNTRIES DEVELOPING ECONOMIES DIFFERENT CURRENCIES DIMINISHING RETURNS DOLLAR VALUE DOMESTIC BONDS DOMESTIC CAPITAL DOMESTIC CURRENCY DOMESTIC INVESTMENT DOMESTIC INVESTOR DOMESTIC INVESTORS DOMESTIC PORTFOLIO DOMESTIC PORTFOLIOS DOMESTIC SECURITIES DUMMY VARIABLE DUMMY VARIABLES ECONOMIC DEVELOPMENT ECONOMIC GROWTH ELIGIBILITY CRITERIA ENDOWMENTS EQUITIES EXCHANGE RATE EXCHANGE RATES EXPENDITURE EXTERNAL BORROWING EXTERNAL CAPITAL EXTERNAL DEBT EXTERNAL DEBTS FACE VALUE FEDERAL RESERVE FEDERAL RESERVE SYSTEM FINANCIAL ASSETS FINANCIAL DEPTH FINANCIAL RISKS FISCAL POLICIES FISCAL POLICY FLOW OF CAPITAL FLOWS OF CAPITAL FOREIGN ASSET FOREIGN ASSETS FOREIGN CURRENCY FOREIGN DEBT FOREIGN DEBTS FOREIGN DIRECT INVESTMENT FOREIGN FINANCING FOREIGN FUNDS FOREIGN INDEBTEDNESS FOREIGN INVESTMENT FOREIGN INVESTOR FOREIGN INVESTORS FOREIGN LOANS FORGIVENESS FORMAL ANALYSIS GDP GDP PER CAPITA GLOBAL DEVELOPMENT FINANCE GNP GOVERNANCE INDICATORS GROSS DOMESTIC PRODUCT GUARANTY HOLDING ILLIQUID ASSETS IMPLICIT GOVERNMENT GUARANTEES IMPLICIT TAXES INCOME INDEBTEDNESS INDIVIDUAL INVESTOR INFLATION INFLATION TAX INSTITUTIONAL INVESTOR INTEREST DIFFERENTIALS INTEREST RATE INTERNATIONAL BANK INTERNATIONAL CAPITAL INTERNATIONAL DEBT INTERNATIONAL DEVELOPMENT INTERNATIONAL ECONOMICS INTERNATIONAL FINANCE INTERNATIONAL INVESTORS INVENTORY INVESTMENT PROJECTS INVESTOR CONFIDENCE LACK OF CAPITAL LDCS LENDERS LEVY LIABILITY LIQUIDITY LIQUIDITY PREMIUM LOAN MACROECONOMIC POLICY MONETARY FUND NET CAPITAL NPV OUTPUT OUTPUT LOSS OVERVALUATION OVERVALUED EXCHANGE RATES PENSION PHYSICAL ASSETS PHYSICAL CAPITAL POLICY ENVIRONMENT POLITICAL ECONOMY POLITICAL RISK POLITICAL UNCERTAINTY PORTFOLIO PORTFOLIO ADJUSTMENT PORTFOLIO ALLOCATION PORTFOLIO ALLOCATIONS PORTFOLIO CHOICE PORTFOLIO CHOICES PORTFOLIO COMPOSITION PORTFOLIO DIVERSIFICATION PORTFOLIO RETURNS PORTFOLIO RISK PORTFOLIOS PRIVATE BORROWERS PRIVATE CAPITAL PRIVATE CAPITAL FLOWS PRIVATE CAPITAL INFLOW PRIVATE CAPITAL STOCK PRIVATE CAPITAL STOCKS PRIVATE DEBT PRIVATE FUNDS PRIVATE INVESTMENT PRIVATE RETURNS PRODUCTION FUNCTION PRODUCTION FUNCTIONS PROPERTY RIGHTS PUBLIC DEBT PUBLIC FINANCE PUBLIC FUNDS PUBLIC INVESTMENT PUBLIC POLICY RATE OF GROWTH RATE OF RETURN RATE OF RETURN ON CAPITAL RATES OF RETURN REAL EXCHANGE RATE REAL EXCHANGE RATES REGIONAL DUMMY REGRESSION ANALYSIS REPUDIATION RESERVES RETURN ON INVESTMENT RISK OF EXPROPRIATION SAFE ASSET SHARE OF CAPITAL SOURCES OF FUNDS SOVEREIGN LENDING STOCKS TAX TAX LIABILITIES TAX LIABILITY TAX OBLIGATIONS TAX RATE TAX RATES TAX RETURNS TAX TREATMENTS TAXATION TRANSACTIONS COSTS TREASURY TREASURY BILL TREASURY BILL RATES TREASURY BILLS UNION VOLATILITIES VOLATILITY WEALTH WITHDRAWAL
Online Access:	http://documents.worldbank.org/curated/en/2001/01/17736873/flight-capital-portfolio-choice http://hdl.handle.net/10986/17215

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Summary:	This article sets flight capital in the context of portfolio choice, focusing on the proportion of private wealth that is held abroad. There are large regional differences in this proportion, ranging from 5 percent in South Asia to 40 percent in Africa. The authors explain cross-country differences in portfolio choice using variables that proxy differences in the risk-adjusted rate of return on capital. They apply the results to three policy issues: how the East Asian crisis affected domestic capital outflows; the effect of the International Monetary Fund-World Bank debt relief initiative for heavily indebted poor countries on capital repatriation; and why so much of Africa's private wealth is held outside the continent.

Flight Capital as a Portfolio Choice

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