Capital Flight and Fiscal Policy in Developing Countries: Evidence from Ethiopia

Ethiopian Economics Association (EEA)
Kumadebis Tamiru Gemechu


This study examines the effect of fiscal policy on capital flight in Ethiopia
using time series data from 1970 to 2012, employing the Autoregressive
Distributed Lag (ARDL) model. The results indicate that past capital flight,
changes in debt, and government expenditure had no significant impact on
capital flight in Ethiopia, while external debt, taxation, and expenditure
practices under different political regimes did have a significant effect. The
study details policy implications emerging from the empirical results.