World Bank Residual Model
Encyclopedia
The World Bank Residual Model, in economics
, refers to a widely used model by economists to measure illicit financial flows
. The data sources for this analysis are the large-scale macroeconomic databases maintained by the International Monetary Fund
and the World Bank
.
In order to estimate illicit financial flows, this method measures a country's source of funds (inflows of capital) against its recorded use (outflows and/or expenditures of capital). Source of funds includes increases in net external indebtedness of the public sector and the net inflow of foreign direct investment. Use of funds includes the current account deficit that is financed by the capital account flows and additions to central bank reserves. An excess source of funds over the recorded use (or expenditures) points to a loss of unaccounted-for capital, and, as such, indicates illicit financial outflow.
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
, refers to a widely used model by economists to measure illicit financial flows
Illicit financial flows
Illicit financial flows, in economics, refers to a form of illegal capital flight and occurs when money is illegally earned, transferred, or utilized. This money is intended to disappear from any record in the country of origin, and earnings on the stock of illicit financial flows outside of a...
. The data sources for this analysis are the large-scale macroeconomic databases maintained by the International Monetary Fund
International Monetary Fund
The International Monetary Fund is an organization of 187 countries, working to foster global monetary cooperation, secure financial stability, facilitate international trade, promote high employment and sustainable economic growth, and reduce poverty around the world...
and the World Bank
World Bank
The World Bank is an international financial institution that provides loans to developing countries for capital programmes.The World Bank's official goal is the reduction of poverty...
.
In order to estimate illicit financial flows, this method measures a country's source of funds (inflows of capital) against its recorded use (outflows and/or expenditures of capital). Source of funds includes increases in net external indebtedness of the public sector and the net inflow of foreign direct investment. Use of funds includes the current account deficit that is financed by the capital account flows and additions to central bank reserves. An excess source of funds over the recorded use (or expenditures) points to a loss of unaccounted-for capital, and, as such, indicates illicit financial outflow.