Private foreign asset accumulation, not just capital flight: Evidence from the Philippines

Abstract

External debt problems have been accompanied in many developing countries with large private capital outflows. The latter phenomenon is usually identified in the literature as ‘capital flight’. This article argues that private foreign asset accumulation is a more appropriate term and compares a great variety of definitions and measurement methods and applies these to Philippine data for 1971–88. Outcomes show striking differences in assessment of the magnitude of the phenomenon. In the preferred definition of this study applied to the Philippines, unrecorded workers remittances from abroad, a factor omitted in other studies, represent a major source of foreign exchange earnings which indirectly support private foreign asset accumulation. Other definitions appear to severely underestimate private capital outflows. Econometric evidence on the causes of private foreign asset acquisition shows a strong sensitivity to the applied definition. Regression analysis for six alternative definitions shows that the ex...