Capital flight from BRICS nations: Does every cloud have a silver lining?

Area of Science:

• Economics
• International Finance
• Econometrics

Background:

• Capital flight poses significant challenges to the economic stability and development of emerging economies.
• BRICS (Brazil, Russia, India, China, South Africa) countries have experienced notable capital outflows, particularly after the global financial crisis.

Purpose of the Study:

• To identify and analyze the key determinants of capital flight from BRICS nations.
• To provide empirical evidence on factors influencing resident capital outflows in these emerging economies.

Main Methods:

• Estimation of capital flight using the residual method.
• Application of the Generalized Method of Moments (GMM) for empirical testing.

Main Results:

• A significant increase in capital flight from BRICS countries was observed, especially following the global financial crisis.
• Empirical findings indicate that past capital flight, real GDP growth rates, exchange rate depreciation, unemployment rates, business confidence index, and financial stability indicators are significant determinants of capital outflows.

Conclusions:

• The study underscores the importance of addressing the identified determinants to curb capital flight from BRICS.
• Effective policy frameworks by fiscal and monetary authorities are crucial for managing resident capital outflows and ensuring economic stability.