Dynamic relationships of capital flight and macroeconomic fundamentals in Malaysia
Understanding the very factors that influence massive capital outflow from an economy is vitally important as it may assist decision makers in formulating effective strategies which can not only mitigate such capital flight but also slow down the deterioration of the economy and even re-generate i...
| Main Authors: | , , , , |
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| Format: | Article |
| Language: | English |
| Published: |
School of Social, Development and Environmental Studies, Faculty of Social Sciences and Humanities, Universiti Kebangsaan Malaysia
2016
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| Online Access: | http://journalarticle.ukm.my/9825/ http://journalarticle.ukm.my/9825/ http://journalarticle.ukm.my/9825/1/18x.geografia-si-feb16-azryani-edam_%281%29.pdf |
| Summary: | Understanding the very factors that influence massive capital outflow from an economy is vitally important as it
may assist decision makers in formulating effective strategies which can not only mitigate such capital flight but
also slow down the deterioration of the economy and even re-generate it. This paper analyzed the dynamic interaction
between macroeconomic fundamentals and capital flight using co-integration and vector auto-regression. The
macroeconomic fundamentals considered were exchange rates, consumer price index, gross domestic products and
interest rates. The results show that macroeconomic fundamentals and capital flight are associated in the long run. In
terms of short-run dynamics and interactions between capital flight and macroeconomic fundamentals, variations in
capital flight are predominantly attributed to its own variations and exchange rate variations. Innovations in capital
flight explain substantial fractions of the GDP, exchange rate, interest rate and CPI variations. |
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