ERF 27th Annual Conference
Capital Flight and the Real Exchange Rate in Resource Scarce MENA Countries
No.
ERF27_78
Publisher
ERF
Date
May, 2021
Topic
O. Economic Development, Technological Change, and Growth
We analyze the determinants of capital flight in three resource scarce MENA countries namely Egypt, Morocco, and Tunisia. Our methodology involves both the linear and the nonlinear autoregressive distributed lag (ARDL) cointegration approach, with a focus on asymmetric relationships between capital flight and the real exchange rate in order to distinguish the effects of overvaluation or undervaluation of the domestic currency on capital flight. Based on annual data between 1975 and 2019, we demonstrate that capital flight responds more to the real exchange rate undervaluation in Egypt, and that the Arab Spring has resulted in higher capital flight in Egypt and Morocco in the long run. Our results also reveal that the real GDP growth rate and inflation are important factors affecting capital flight in Morocco, while the lagged values of capital flight and the institutional quality are more prevalent in Tunisia.
Research Fellows
Ayse Yasemin Yalta
Professor, Department of Economics, Hacettepe University, Turkey
Research Fellows
Abdullah Talha Yalta
Professor of Economics, TOBB University of Economics...