BUFT Journal of Business and Economics

The Impact of Capital Flight on Economic Growth in Bangladesh

University of Dhaka, Islamic University of Technology
Email: kaniz-2015212539@ib.du.ac.bd

Abstract

Purpose: This paper aims to identify the impact of capital flight on economic growth in Bangladesh and the causal relationship between variables responsible for capital flight.Methodology: The study used the residual method to estimate capital flight in Bangladesh as an empirical approach. The Linear regression model has been used to estimate the effect of capital flight on the GDP growth rate, which is the proxy of economic growth. The causality test between capital flight and GDP growth was conducted using the Granger Causality test.Findings: Although the researcher expected to find a negative relationship between capital flight and economic growth in Bangladesh, the data shows a positive relationship. However, the causality test shows that GDP growth does not have any impact on capital flight in Bangladesh.Practical Implication: This study contributes by identifying the impact of capital flight on the economic growth of Bangladesh. Despite the positive result, Bangladesh should not ignore the capital flight risks. Therefore, the study forwards considerations for policymakers to control the current upward trend of capital flight. Value: No previous study on Bangladesh highlights this issue. Considering Bangladesh's economic growth for the last decades, it is imperative to see how capital flight impacts its GDP growth. Research Limitations: This study is limited to only using the residual method to estimate capital flight. The multi-dimensional research might generate better results and understanding.