engleski

Capital Flight: The Case of Croatia

In economic theory prevails general agreement that capital flows towards capital scarce countries with increasing profit opportunities whereas it flees from higher wage developed countries. A small developing country like Croatia, constantly faced with a chronic budget deficit and the lack of significant foreign direct investments must be aware of possible capital outflows. This is even more important nowadays when economic crisis in Croatia still does not abate. Therefore the goal of this study is to estimate the amounts of capital flight for Croatia, evaluate its causes and effects and discuss available options for macroeconomic management. Empirical assessment relies on static analysis that compares the data from 2008 to 2013. Methodologically this study is a continuation of two previous studies that comprised the periods 1993-1999 and 2000-2007. Two versions of residual method have been used in estimation of the exact amount of the capital flight. The results suggest relatively significant amounts of capital flight during the observed period. Moreover research suggests that there has been a constant decline of capital flight amounts due to a deterioration of macroeconomic indicators in Croatia. The reason for some of the changes could be found in declining capital inflows in Croatia within last few years. It has been also considered that unregistered tourism profits have been hiding behind the net errors and omissions item in the balance of payments. Croatia has been fighting with a constant lack of capital. Each capital flight is au contraire main macroeconomic goals. Therefore, we find it is necessary to study the phenomenon of capital flight for Croatia in the future as well.

capital flight; Croatia; empirical assessment; macroeconomic management

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