Capital flight was a major economic concern during the early eighties. More recently, events in South America, Asia, and elsewhere have shown that it remains an important issue for individual countries and the entire world. Given the issue's importance, there is an extensive amount of literature on capital Right on the subject but there is still not a common definition of capital flight. The study reviews the major definitions and estimates the determinants of capital flight in Turkey from 1971--1995.; In early studies, the major reasons for capital flight were high inflation, overvaluation of currencies and interest rate differences between the country under study and the United States. Using the five major capital flight measures with Turkish economic data reveals that four definitions (World Bank, Morgan Guaranty, Cline, and Dooley) yield similar results while the Cuddington method differs significantly.; In this study, capital controls in the country, deficit to GNP ratio, overvaluation of the Turkish Lira and real and nominal interest rate differentials between Turkey and Germany are revealed to be the key determinants for capital flight from Turkey. The results show that capital control, overvaluation of the currency, high deficit-GNP ratio and nominal interest rate differences enter the equation significantly with the expected signs. Real interest rate differentials do not appear to be a significant factor in determining capital flight from Turkey. The study also looks at the effect of political instability on capital flight, the results are insignificant.
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