In this paper we assess the effects of financial liberalization on cap
ital flight in African economies. A portfolio model, in which capital
flight is one of the assets, is estimated on a sample of nine African
countries for 1970-91. The estimation results suggest that financial l
iberalization induces a reduction in capital flight. After augmenting
the model with submodels for the banking sector, the government sector
and the external sector, we conduct simulation experiments involving
an interest rate deregulation, a decrease in reserve requirements and
a change in exchange rate policy. The simulation results show that cap
ital flight is reduced by all the three financial liberalization measu
res. The effects, however, are very small. Considering both the estima
tion and simulation results, we conclude that financial liberalization
policies are useful in attempts to reduce capital flight in African e
conomies, but per se the policies may not be the panacea. (C) 1998 Els
evier Science Ltd. All rights reserved.