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Freeing Greece from capital controls: Were the restrictions enforced in time?

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  • Samitas, Aristeidis
  • Polyzos, Stathis

Abstract

Recent developments in Greece have caused for the implementation of banking capital controls on the outflow of funds, a policy decision not uncommon, especially in emerging markets. However, the issues of the Greek economy, which seem to stem from the public sector but have been passed on to the banking sector, pose a unique challenge to researchers. In this paper, we employ VBanking, an object-oriented model for banking simulations to examine whether capital controls in Greece were enforced at the appropriate time. Additionally, we propose that the banking sector will not purge this regulation soon. Finally, we demonstrate the destructive effects of capital controls both on the financial system and on the real economy. We present the empirical results of our work, which suggest that the Greek authorities’ response to the deterioration of the banking sector was lagged.

Suggested Citation

  • 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.
  • Handle: RePEc:eee:riibaf:v:37:y:2016:i:c:p:196-213
    DOI: 10.1016/j.ribaf.2015.11.005
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    More about this item

    Keywords

    Capital controls; Greece; VBanking; Banking regulation;
    All these keywords.

    JEL classification:

    • G01 - Financial Economics - - General - - - Financial Crises
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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