Document Type : Original Article

Authors

• Majid Dashtban ¹
• Sahar Dashtban Farouji ²
• Mohammad Vahdani ³

¹ Associate Professor of Economics, University of Bojnord

² Assistant Professor of Economics, University of Bojnord.

³ Assistant Professor of Accounting, University of Bojnord.

Abstract

Capital flight has emerged as a significant challenge for many countries, exerting a direct impact on economic growth and development. Generally, uncertainty about economic policies hinders investors from forming a clear and transparent outlook for the future, prompting them to invest in a politically and economically stable environment. Consequently, political, economic, and financial risks of a country are among the most influential factors contributing to capital flight. This study aims to investigate the threshold effects of country risk on capital flight in Iran during the period 1984-2022. For this, after conducting unit root and linearity tests, the relevant model was estimated using the Smooth Transition Regression (STR) method. The estimation results revealed that composite risk has a positive and significant impact on capital flight in both regimes; as the risk exceeds its threshold, the intensity of its impact on capital flight increases. Moreover, the results indicated that although the effect of the real interest rate on capital flight is negative in both regimes, this effect is only significant in the second regime. Also, the impact of the stock index on capital flight is positive and significant only in the first regime.

Keywords

• Capital Flight
• Economic Risk
• Financial Risk
• Political Risk
• Smooth Transition Regression Model

Main Subjects

• Macroeconomics