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The Role Of Capital Controls In Mediating Global Shocks

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  • Kerli Lille

Abstract

This paper studies the role of capital controls in the transmission of global commodity price shocks in explaining the variation of domestic business cycles in 89 countries for the period 1995–2013. The results suggest that countries that are relatively open or closed have lower variance in output, consumption and investments explained by global shocks than those countries that have partially liberalised capital markets. On the contrary, relatively closed and open economies have a much higher share of the trade balance to output ratio volatility explained than partially liberalised countries. This pattern is independent of the level of economic development or geographical region. The results show that a partial liberalisation of the capital account might make countries more vulnerable to world shocks, than opening and closing the capital account completely.

Suggested Citation

  • Kerli Lille, 2017. "The Role Of Capital Controls In Mediating Global Shocks," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 102, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    • Handle: RePEc:mtk:febawb:102
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    References listed on IDEAS

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    More about this item

    Keywords

    World Shocks; Capital Controls; Capital Account Liberalisation;
    All these keywords.

    JEL classification:

    • F3 - International Economics - - International Finance
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • F45 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Macroeconomic Issues of Monetary Unions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation

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