Empirical Investigation of Capital Flight and Illicit Financial Flows, Economic Growth in Palestine

Abstract

In the present study was to verify the relationship between capital flight and illicit financial flows, exhibiting the impact of stable economic growth in Palestine during the period (2009-2018). We also use models of the balance of payments of the State, the study results showed that the total illicit financial flows, about $14.42 million annually, 16.4% of GDP. In addition, through the application of the net omissions and style error in the balance of payments and expenditures, the total capital flight estimated at $26.61 million, 19.6% of GDP. The Granger causality test shows that economic growth granger causes both the illicit financial flows and the capital flight. The study also found that there is a negative and significant relationship between economic growth and capital flight. Furthermore, there is a positive relationship between illicit financial flows and capital flight. We have examined theory (Granger) causality, which shows that economic growth causes all of the illegal financial flows and capital flight. The study showed also negative correlation and significant between economic growth and capital flight. Besides, it can be this relationship is negative between illicit financial flows and capital flight. This relationship can be detailed in this research. It seems this experimental investigation is also a strong relationship and engagement between capital flight and financial flows from the standpoint of their impact on economic growth in Palestine. It can be summarized in the study that the process of capital flows and capital flight represent an important role in raising the rate of economic recovery in the country and that the flow of capital within the state is one of the most important factors for national economic growth.