Modeling capital flight in Iran's economy (An approach based on reducing uncertainty in model selection)

Articles in Press

Document Type : Original Article

Authors

1 Phd Student, Department of Economics, Isfahan (Khorasgan) Branch, Islamic Azad University, Isfahan, Iran.

2 Associate Professor, Department of Economics, Isfahan, (Khorasgan) Branch, Islamic Azad Unevisity, Isfahan, Iran

3 Assistant Professor department of Economics, Islamic Azad University, Isfahan, Iran

10.22075/jem.2025.36457.1971

Abstract

Several factors affect capital flight, and the multiplicity of these factors causes ambiguity and confusion in decision-making in this area; as a result, developing a desirable model and reducing the dimensions of variables affecting capital flight is of great importance. Bayesian averaging approaches have high potential in this area. Accordingly, the aim of the present study is to model capital flight in the Iranian economy. The selected time period of the study is 1990 to 2023. In this article, 41 variables affecting capital flight were modeled using Bayesian averaging models. Based on the results, 18 non-fragile variables; which had the highest level of probability of capital flight; were selected to be present in the optimal model. The most important non-fragile variables affecting capital flight in the Iranian economy were identified as political stability; sanctions and foreign debt. Considering the presence of the foreign debt variable in the non-fragile variables, the debt-based theory in the field of capital flight of the Iranian economy is confirmed.

Keywords

Journal of Econometric Modelling

Articles in Press, Accepted Manuscript
Available Online from 12 June 2025

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