Review on Determinants of Capital Flight

Capital flight is the shift of one investment to another in search of greater prospect or increased returns. Capital flight is sometimes stimulated by a nation’s unfavorable conditions where the country may be undergoing high inflation or political turmoil. However, it is most commonly seen at times of currency instability. Most of the time, the outflows are large enough to affect a country’s entire financial system. Simply to say, such phenomenon is bad for the home country as it deters the economy. This is especially true for developing countries whereby the nation’s financial status is often not strong enough to sustain huge amount of capital flight