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Weather shocks and capital flight

Published online by Cambridge University Press:  20 August 2025

Yacouba Kassouri Open the ORCID record for Yacouba Kassouri [Opens in a new window]
Yacouba Kassouri*
Affiliation:
Biodiversity Economics, German Centre for Integrative Biodiversity Research (iDiv) Halle-Jena-Leipzig, Leipzig, Germany Faculty of Finance and Accounting, Prague University of Economics and Business, Prague, Czech Republic
*
Email: yacouba.kassouri@idiv.de
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Abstract

While a growing body of literature studies the effects of weather shocks on economic activity in low-income countries, relatively little is known about their impact on cross-border capital flows. This study investigates whether weather shocks, specifically deviations in precipitation and temperature from their long-term averages, trigger capital flight from Africa. Exploiting the variation in within-country exposure to weather shocks, we find that temperature shocks lead to increased capital outflows and trade misinvoicing. The long-run relationship between temperature and capital flight is conditional upon country-specific factors, such as reliance on oil exports, institutional frameworks and financial infrastructures. Our findings reveal a moderate role of state capacity in the relationship between weather shocks and capital flight, highlighting the need for further investigation into other potential mechanisms.

Keywords

Africacapital flightcapital reallocationstate capacityweather shocks

JEL classification

Q54: Climate • Natural Disasters and Their Management • Global Warming F21: International Investment • Long-Term Capital Movements F32: Current Account Adjustment • Short-Term Capital Movements H11: Structure, Scope, and Performance of Government

Information

Type
Research Article
Information
Environment and Development Economics , First View , pp. 1 - 20
Copyright
© The Author(s), 2025. Published by Cambridge University Press.

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