مقاله انگلیسی رایگان در مورد سقوط نقدینگی: مقاصد مالی فراساحلی و برنامه های صندوق بین المللی پول – الزویر 2023

Abstract

A growing body of literature scrutinizes the harmful consequences of capital flight to offshore financial destinations. While financial integration is a well-known facilitator of capital flight, we shed light on an under-appreciated determinant—the availability of an IMF bailout. Expanding on previous literature analyzing moral hazard in the context of IMF programs, we introduce a socially even more destructive mechanism that we label the ‘crash for cash’ effect. We argue that by drawing on the IMF, elites can benefit from accumulating excessive debt to extract rents and hide these safely in offshore financial destinations while steering their countries into financial disaster. To test this mechanism, we show that elite wealth in offshore bank accounts has a first-order impact on a captured government’s willingness to draw on a lender of last resort. From a policy perspective, our analysis underscores the importance of closing financial loopholes to mitigate the devastating socio-economic effects of sophisticated financial engineering in a financially integrated global economy.

Introduction

Capital flight is a key obstacle to sustainable development. While policymakers often point the finger at financial investors, in many cases, well-connected local elites drive capital flight into offshore financial destinations. These elites plunder the wealth of their countries and expatriate assets into safe havens (Jayachandran and Kremer, 2006, Garcia-Bernardo et al., 2017, Andersen et al., 2020).1 Depriving a country of investible capital can lead to a loss of tax revenues and rising inequality, to the effect that elite capital flight ultimately undermines macroeconomic stability (Alesina and Tabellini, 1989, Ndikumana et al., 2014, Frantz, 2018): notwithstanding its ethical status, such behavior undermines the quality of governance, furthering endemic corruption and crony business practices that amplify financial vulnerabilities (Cerra et al., 2008, Meierrieks and Schneider, 2021).

Previous literature analyzing the determinants of elite capital flight identifies dysfunctional governance frameworks that provide a fertile breeding ground for criminal activities such as embezzlement, trade misinvoicing, and tax evasion (for a review, see Cooley et al. (2018)). Weak institutions facilitate capital flight because they allow wealthy elites to move embezzled funds abroad without punishment (Collier et al., 2001, Ndikumana and Boyce, 2003, Le and Rishi, 2006).

Conclusion

The IMF plays a vital role in supporting countries during times of economic hardship, earning it a reputation as “a global payday loan company for countries who have got into trouble and can’t meet their financial commitments — the difference being that instead of charging sky-high interest rates, it demands radical economic reforms”.33

Researchers have analyzed the circumstances under which the IMF decides to intervene and the conditions it imposes in exchange for financial relief (e.g., Reinsberg et al., 2019). We analyze the role of international capital flight and its impact on IMF involvement and program design. We argue that the ability to draw on the IMF creates perverse economic incentives so that a country’s elites can privatize economic gains by moving funds into offshore financial destinations before the arrival of the Fund. Although the Fund possesses numerous instruments to address economic crises, it does not have any means to seize elite wealth in offshore financial destinations, so the costs of elite capital flight are passed onto the population at large.