Capital Account Openness?Institutional Quality And Capital Flight

Capital flight,as a common phenomenon,has troubled developing countries in a long term and a large number of literature studies capital flight for different countries.The huge amount of capital flight is a loss of valuable resources for a country,and can play a significant impact on the economic growth of a country and the stability of the financial system.On the other hand,financial liberalization has led some countries to have or are undergoing capital account liberalization,and the relaxation of capital account controls has facilitated the free flow of capital and created the conditions for capital flight.Under the background of capital market integration,it is of practical significance to study the relationship between capital account openness and capital flight.The causes of capital flight are complex,but the basic institutional characteristics of a country in terms of law,politics and so on should not be overlooked.So this article will also include institutional factors into the scope of the study.This paper uses the panel data of the BRIC countries to study the relationship between capital account openness,institutional quality and capital flight.The conclusion of this paper shows that for the BRIC countries,the improvement of the quality of the legal system has played a significant and robust suppression effect on capital flight.And the increase in the overall openness of the capital account has played a significant inhibitory effect on capital flight,mainly due to that the inhibitory effect on capital flight of inflow direction of capital account openness overwhelms the promotion effect of outflow direction.The research of this paper is of great significance.From the practical point of view,the conclusion of this paper provides a way for China to curb capital flight.The promotion of legal system can increase the security of investment income and protect the investment result of investors,which is beneficial to curb capital flight.Promoting the construction of our legal system and improving the quality of the legal system is an effective way to curb capital flight.On the other hand,whether the increase in capital account openness will lead to an increase in the scale of capital flight depends on the direction and size in effect of influx of cross-border funds and outflow of cross-border funds on capital flight.For the BRIC countries,inhibitory effect on capital flight of influx of the cross-border funds is larger than promotion effect on capital flight of outflow of cross-border funds,so the effective use of inflow of cross-border funds and effective supervision of outflow of cross-border funds can deal with capital flight to a certain extent.From the theoretical point of view,so far the domestic academic studies which consider the effect of institutional factors on capital flight are scarce.Based on the empirical point of view,this paper for the BRIC case study to investigate the relationship between capital account openness,institutional quality and capital flight enrich the existing literature.