Corruption and Capital Flight: Evidence From Pakistan

The objective of this research paper is to analyze the impact of corruption and capital flight on Pakistan economy. The author used cross sectional data from 1995 to 2018 for this purpose. The dependent variable of this study was capital flight while independent variables include corruption perception index (CPI) gross domestic product (GDP) capital flight (CF), inflation (INF), exchange rate (EXR) and interest rate. Different econometric techniques such as descriptive statistics, correlation analysis, Augmented Dickey Fuller (ADF) test and Autoregressive Distributional Lag (ARDL) and ECM were applied to analyze data. The findings of this study show that there is positive and significant positive relationship between corruption and capital flight. Thus, corruption must be eradicated to control capital flight.