The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
The risks of large capital losses on the domestic assets of developing countries resulting from expropriation, inflation, or devaluations are identified as the major causes of capital flight. The combination of large foreign loans and capital flight from developing countries during the 1970s and early 1980s reflected different perceptions of domestic residents and foreign lenders regarding the risks of holding domestic assets. However, the debt crisis reduced these differences in perceived risks, and resulted in a decline of foreign loans coupled with continuation of capital flight. If sound macroeconomic and structural policies can reduce those risks, they can also stem capital flight.