Munich Personal RePEc Archive

Resources bless BRICS

Sebri, Maamar and Dachraoui, Hajer (2020): Resources bless BRICS.

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Abstract

The rise of the BRICS (Brazil, Russia, India, China and South Africa) as resource-rich countries has triggered the question on the blessing feature of the natural resources wealth. Whatever natural resources are abundantly available in a country or not, it is the rational use and control that may turn it into a blessing rather than a curse. This paper investigates the determinants of capital flight in BRICS countries during the period 2001-2017 while putting a greater emphasis on the role of natural resource rents. The empirical evidence is based on the panel-ARDL regression model estimated with PMG procedure. The econometric analysis reveals that natural resources exert a negative and significant effect on capital flight, indicating that the larger natural resource rents, the less capital flight. This gives support for the natural resource bless hypothesis. Empirical results show also that capital flight is determined by macroeconomic and institutional factors as well. However, the disaggregated analysis by natural resource components and the short-run estimates by individual countries show some disparities that cannot be overlooked. Despite the large benefits of natural resources wealth, curbing the capital flight waves remains a key challenge that faces the BRICS grouping in order to ensure that profits are maximized for the good of countries.

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