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Controlling Capital? Legal Restrictions and the Asset Composition of International Financial Flows

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Author Info

  • Mahir Binici
  • Michael M. Hutchison
  • Martin Schindler

Abstract

How effective are capital account restrictions? We provide new answers based on a novel panel data set of capital controls, disaggregated by asset class and by inflows/outflows, covering 74 countries during 1995-2005. We find the estimated effects of capital controls to vary markedly across the types of capital controls, both by asset categories, by the direction of flows, and across countries' income levels. In particular, both debt and equity controls can substantially reduce outflows, with little effect on capital inflows, but only high-income countries appear able to effectively impose debt (outflow) controls. The results imply that capital controls can affect both the volume and the composition of capital flows.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 09/208.

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Length: 28
Date of creation: 01 Sep 2009
Date of revision:
Handle: RePEc:imf:imfwpa:09/208

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Keywords: Capital controls; Capital flows; Asset management;

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References

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Citations

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Cited by:
  1. Prema-chandra Athukorala & Juthathip Jongwanich, 2012. "How Effective are Capital Controls? Evidence from Malaysia," Departmental Working Papers 2012-16, The Australian National University, Arndt-Corden Department of Economics.
  2. Jinzhao Chen & Thérèse Quang, 2012. "International Financial Integration and Economic Growth: New Evidence on Threshold Effects," Working Papers halshs-00710139, HAL.
  3. Bruno Coelho & Kevin Gallagher, 2010. "Capital Controls and 21st Century Financial Crises: Evidence from Colombia and Thailand," Working Papers wp213, Political Economy Research Institute, University of Massachusetts at Amherst.
  4. Patnaik, Ila & Shah, Ajay, 2011. "Did the Indian capital controls work as a tool of macroeconomic policy?," Working Papers 11/87, National Institute of Public Finance and Policy.
  5. Jinzhao Chen & Thérèse Quang, 2012. "International Financial Integration and Economic Growth: New Evidence on Threshold Effects," PSE Working Papers halshs-00710139, HAL.
  6. Prati, Alessandro & Schindler, Martin & Valenzuela, Patricio, 2012. "Who benefits from capital account liberalization? Evidence from firm-level credit ratings data," Journal of International Money and Finance, Elsevier, vol. 31(6), pages 1649-1673.
  7. Christiansen, Lone & Schindler, Martin & Tressel, Thierry, 2013. "Growth and structural reforms: A new assessment," Journal of International Economics, Elsevier, vol. 89(2), pages 347-356.
  8. Rudiger Ahrend & Antoine Goujard, 2012. "International Capital Mobility and Financial Fragility - Part 3. How Do Structural Policies Affect Financial Crisis Risk?: Evidence from Past Crises Across OECD and Emerging Economies," OECD Economics Department Working Papers 966, OECD Publishing.
  9. Julian Caballero, 2012. "Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises? Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom- Bust Cycles," Research Department Publications 4775, Inter-American Development Bank, Research Department.
  10. Rudiger Ahrend & Antoine Goujard & Cyrille Schwellnus, 2012. "International Capital Mobility: Which Structural Policies Reduce Financial Fragility?," OECD Economic Policy Papers 2, OECD Publishing.
  11. Sahoo, Ganeswar, 2010. "International Capital Flows: An empirical study of the relationship between equity and debt investments," MPRA Paper 24797, University Library of Munich, Germany.

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