Effectiveness of Capital Outflow Restrictions

By Christian Saborowski, Sarah Sanya, Hans Weisfeld, Juan Yepez

January 21, 2014

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Format: Chicago

Christian Saborowski, Sarah Sanya, Hans Weisfeld, and Juan Yepez. Effectiveness of Capital Outflow Restrictions, (USA: International Monetary Fund, 2014) accessed December 21, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the effectiveness of capital outflow restrictions in a sample of 37 emerging market economies during the period 1995-2010, using a panel vector autoregression approach with interaction terms. Specifically, it examines whether a tightening of outflow restrictions helps reduce net capital outflows. We find that such tightening is effective if it is supported by strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive. When none of these three conditions is fulfilled, a tightening of restrictions fails to reduce net outflows as it provokes a sizeable decline in gross inflows, mainly driven by foreign investors.

Subject: Balance of payments, Capital controls, Capital flows, Capital outflows, Econometric analysis, Industrial production, Production, Vector autoregression

Keywords: Capital, Capital controls, Capital flow restriction, Capital flows, Capital outflows, Control tightening, Emerging economies, Flow variable, Global, Industrial production, Inflow control intensity, Interest rate stabilization, Outflow control index, Outflow control restriction, Outflow restriction, Vector autoregression, WP

Publication Details

Pages:

34
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2014/008
Stock No:

WPIEA2014008
ISBN:

9781484379752
ISSN:

1018-5941

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