Capital Controls: An Evaluation
AbstractThe literature on capital controls has (at least) four very serious apples-to-oranges problems: (i) There is not unified theoretical framework to analyze the macroeconomic consequences of controls; (ii) there is significant heterogeneity across countries and time in the control measures implemented; (iii) there are multiple definitions of what constitutes a "success" and (iv) the empirical studies lack a common methodology -- furthermore these are significantly "overweighted" by a couple of country cases (Chile and Malaysia). In this paper, we attempt to address some of these shortcomings by: being very explicit about what measures are construed as capital controls. Also, given that success is measured so differently across studies, we sought to "standardize" the results of over 30 empirical studies we summarize in this paper. The standardization was done by constructing two indices of capital controls: Capital Controls Effectiveness Index (CCE Index), and Weighted Capital Control Effectiveness Index (WCCE Index). The difference between them lies only in that the WCCE controls for the differentiated degree of methodological rigor applied to draw conclusions in each of the considered papers. Inasmuch as possible, we bring to bear the experiences of less well known episodes than those of Chile and Malaysia.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 11973.
Date of creation: Jan 2006
Date of revision:
Publication status: published as Nicolas Magud, Carmen M. Reinhart. "Capital Controls: An Evaluation," in Sebastian Edwards, editor, "Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences" University of Chicago Press (2007)
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Other versions of this item:
- Nicolas Magud & Carmen M. Reinhart, 2005. "Capital Controls: An Evaluation," University of Oregon Economics Department Working Papers 2005-19, University of Oregon Economics Department.
- Reinhart, Carmen & Magud, Nicolas, 2007. "Capital controls: An evaluation," MPRA Paper 14097, University Library of Munich, Germany.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F31 - International Economics - - International Finance - - - Foreign Exchange
This paper has been announced in the following NEP Reports:
- NEP-ALL-2006-02-26 (All new papers)
- NEP-FMK-2006-02-26 (Financial Markets)
- NEP-IFN-2006-02-26 (International Finance)
- NEP-SEA-2006-02-26 (South East Asia)
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