Capital flight, institutional quality, and economic growth: Evidence from African economies

Abstract

This paper examines the impact of capital flight on economic growth in Africa, highlighting the crucial role of institutional quality. Through an econometric analysis of data from 28 African countries observed during the 2000-2022 period, it is shown that capital flight significantly hinders growth by reducing the resources available for economic development. However, strong institutions can mitigate this negative impact through transparent and effective governance, notably by reducing corruption and enhancing political stability. The study recommends improving institutional quality to limit illicit financial flows and promote sustainable growth, while also emphasizing significant income-based disparities between countries.