Capital Flight Revisited: The Case of Trinidad and Tobago in the Context of Financial Liberalisation, 1971-2011

Capital flight, despite disagreements about its exact definition, has been a widely researched area of study over the last 30 years. Most of the initial studies were published during the late 1980s and early 1990s, a period when many developing countries, including some in the Caribbean, were going through programs of structural adjustment including financial liberalization. According to the conventional neoliberal view, financial liberalization should improve resource allocation, increase stability, increase growth, and reduce the incentive for capital flight to occur from developing countries. Financial liberalization has been a major part of economic reform in Trinidad and Tobago. The decision to remove interest rate controls, float the exchange rate in 1993, allow domestic holdings of foreign currency accounts, remove restrictions on capital flows, and increase the interconnectivity within the international financial system should have reduced the capital flight estimates recorded pre 1993.