Capital Flight and Investment Dynamics in Nigeria: A Time Series Analysis (1970-2006)

Adesoye, A. Bolaji and Maku, Olukayode E. and Atanda, Akinwande A. (2012): Capital Flight and Investment Dynamics in Nigeria: A Time Series Analysis (1970-2006). Forthcoming in: : pp. 1-21.

Abstract

This study critically examines the implications of capital flight on investment growth in Nigeria between 1970 and 2006, because of the consequential effect it has on economic growth. The time series data properties incorporated were examined using the Augmented Dickey-Fuller (ADF) unit root test and the results revealed that Investment, capital flight, interest rate and exchange rate were stationary at levels excluding exchange rate found to be integrated at first difference. The Augmented Engle-Granger (AEG) co-integration test employed to investigate the dynamic relationship between capital flight and investment level in Nigeria, revealed that there exist long-run interaction. Though, capital flight was found to exert positive but insignificant effect on investment growth during the review period. While, the short-run dynamic interaction as a result of the structural instability in the long-run was captured by the Error Correction Mechanism (ECM) model which was found inestimable due to the high collinearity existing among the incorporated variables. Policy recommendations were proffered base on the research findings.

• Item Type: MPRA Paper
• Language: English
• Keywords: Capital flight, Investment behaviour, Long-run, Stationarity, ECM, Cointegration, Nigeria
• Subjects: E - Macroeconomics and Monetary Economics > E2 - Consumption, Saving, Production, Investment, Labor Markets, and Informal Economy > E22 - Investment ; Capital ; Intangible Capital ; Capacity; E - Macroeconomics and Monetary Economics > E0 - General > E00 - General; C - Mathematical and Quantitative Methods > C2 - Single Equation Models ; Single Variables > C22 - Time-Series Models ; Dynamic Quantile Regressions ; Dynamic Treatment Effect Models ; Diffusion Processes; A - General Economics and Teaching > A1 - General Economics > A10 - General

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