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Motivations for capital controls and their effectiveness

Listed author(s):
  • Pandey, Radhika

    ()

    (National Institute of Public Finance and Policy)

  • Pasricha, Gurnain K.

    (International Economic Analysis Department, Bank of Canada)

  • Patnaik, Ila

    ()

    (National Institute of Public Finance and Policy)

  • Shah, Ajay

    ()

    (National Institute of Public Finance and Policy)

We assess the motivations for changing capital controls and their effectiveness in India, a country where there is a comprehensive capital control system covering all crossborder transactions. We focus on foreign borrowing by firms, where systemic risk concerns could potentially play a role. A novel fine-grained data set of capital control actions is constructed. We find that capital control actions are potentially motivated by exchange rate considerations, but not by systemic risk issues. A quasi-experimental design reveals that the actions appear to have no impact either on the exchange rate or on variables connected with systemic risk.

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File URL: http://www.nipfp.org.in/media/medialibrary/2016/04/WP_2016_168.pdf
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Paper provided by National Institute of Public Finance and Policy in its series Working Papers with number 16/168.

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Length: 46
Date of creation: Apr 2016
Handle: RePEc:npf:wpaper:16/168
Note: Working Paper 168, 2016
Contact details of provider: Web page: http://www.nipfp.org.in

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