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Capital Controls in the 21st Century

Author

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  • Eichengreen, Barry
  • Rose, Andrew

Abstract

Governments have rarely imposed or removed capital controls in response to short-term fluctuations in output, the terms of trade, or financial-stability considerations. We show empirically that controls on the international flow of financial capital are highly durable, often remaining in place for decades; their duration is striking compared with related phenomena such as exchange rate regimes. This represents a challenge to any proposed use of capital controls as an instrument of macroeconomic and macro-prudential management, since we have little experience in using capital controls at high- or medium frequencies. Any new policy initiative mandating frequent shifts in controls will be based on theory rather than data-driven experience.

Suggested Citation

  • Eichengreen, Barry & Rose, Andrew, 2014. "Capital Controls in the 21st Century," Journal of International Money and Finance, Elsevier, vol. 48(PA), pages 1-16.
  • Handle: RePEc:eee:jimfin:v:48:y:2014:i:pa:p:1-16
    DOI: 10.1016/j.jimonfin.2014.08.001
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Graham Bird & Alex Mandilaras, 2015. "Transitions in exchange rate regimes in the aftermath of the global economic crisis," Applied Economics Letters, Taylor & Francis Journals, vol. 22(7), pages 567-571, May.
    2. repec:mtp:titles:0262037165 is not listed on IDEAS
    3. Akram, Gilal Muhammad & Byrne, Joseph P., 2015. "Foreign exchange market pressure and capital controls," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 37(C), pages 42-53.
    4. Li, Jie & Rajan, Ramkishen S., 2015. "Do capital controls make gross equity flows to emerging markets less volatile?," Journal of International Money and Finance, Elsevier, vol. 59(C), pages 220-244.
    5. Shigeto Kitano & Kenya Takaku, 2017. "Capital Controls, Macroprudential Regulation,and the Bank Balance Sheet Channel," Discussion Paper Series DP2017-18, Research Institute for Economics & Business Administration, Kobe University, revised Jun 2018.
    6. Gkillas (Gillas), Konstantinos & Tsagkanos, Athanasios & Siriopoulos, Costas, 2016. "The risk in capital controls," Finance Research Letters, Elsevier, vol. 19(C), pages 261-266.
    7. Chen, Jinzhao & Qian, Xingwang, 2016. "Measuring on-going changes in China's capital controls: A de jure and a hybrid index data set," China Economic Review, Elsevier, vol. 38(C), pages 167-182.
    8. repec:rnp:ecopol:ep1711 is not listed on IDEAS
    9. Chris Garbers & Guangling Liu, 2017. "Flow specific capital controls for emerging markets," Working Papers 12/2017, Stellenbosch University, Department of Economics.
    10. Samitas, Aristeidis & Polyzos, Stathis, 2016. "Freeing Greece from capital controls: Were the restrictions enforced in time?," Research in International Business and Finance, Elsevier, vol. 37(C), pages 196-213.

    More about this item

    Keywords

    Data; International; Financial; Duration; Persistence; Durability;

    JEL classification:

    • F02 - International Economics - - General - - - International Economic Order and Integration
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation

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