Capital Controls in Times of Crisis

Capital Controls in Times of Crisis – Do They Work?

By Apoorv Bhargava, Romain Bouis, Annamaria Kokenyne, Manuel Perez-Archila, Umang Rawat, Ratna Sahay

March 17, 2023

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Format: Chicago

Apoorv Bhargava, Romain Bouis, Annamaria Kokenyne, Manuel Perez-Archila, Umang Rawat, and Ratna Sahay. Capital Controls in Times of Crisis – Do They Work?, (USA: International Monetary Fund, 2023) accessed December 30, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

This paper provides an analysis of the use and effects of capital controls in 27 AEs and EMDEs which experienced at least one financial crisis between 1995 and 2017. Countries often turn to using capital controls in crisis: some ease inflow controls while others tighten controls on outflows. A key finding is that countries with pervasive controls before the start of the crisis are shielded compared to countries with more open capital accounts, which see a significant decline in capital flows during crises. In contrast, the effectiveness of capital controls introduced during crises appears to be weak and difficult to identify. There is also some evidence that the introduction of outflow controls during crises is negatively associated with sovereign debt ratings, but that investors may actually forgive with time.

Subject: Balance of payments, Capital account, Capital controls, Capital flows, Capital outflows, Financial crises

Keywords: Capital account, Capital controls, Capital flows, Capital outflows, Caribbean, Controls on outflow, Financial crises, Global, Inflow control, Outflow control, Outflow controls Introduced, Tightening control

Publication Details

Pages:

37
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2023/067
Stock No:

WPIEA2023067
ISBN:

9798400236235
ISSN:

1018-5941

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