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How Effective are Capital Controls in Asia?

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Abstract

This study examines the effects of capital account restrictions on capital flows in nine Asian economies over the period 1995–2005 using panel regressions with fixed effects. The results show that capital controls significantly affect capital flows when such flows are disaggregated by asset type and direction of flow. Tests for the presence of possible asymmetric effects, substitution effects, and endogeneity of capital controls are conducted.

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  • Gochoco-Bautista,, Maria Socorro & Jongwanich, Juthathip & Lee, Jong-Wha, 2011. "How Effective are Capital Controls in Asia?," ADB Economics Working Paper Series 224, Asian Development Bank.
  • Handle: RePEc:ris:adbewp:0224
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    References listed on IDEAS

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    1. Sebastian Edwards, 2007. "Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences," NBER Books, National Bureau of Economic Research, Inc, number edwa06-1, January.
    2. Edwards, Sebastian & Rigobon, Roberto, 2009. "Capital controls on inflows, exchange rate volatility and external vulnerability," Journal of International Economics, Elsevier, vol. 78(2), pages 256-267, July.
    3. Nicolas Magud & Carmen M. Reinhart, 2007. "Capital Controls: An Evaluation," NBER Chapters,in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 645-674 National Bureau of Economic Research, Inc.
    4. Jonathan David Ostry & Atish R. Ghosh & Karl F Habermeier & Marcos d Chamon & Mahvash S Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows; The Role of Controls," IMF Staff Position Notes 2010/04, International Monetary Fund.
    5. De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000. "Controls on capital inflows: do they work?," Journal of Development Economics, Elsevier, vol. 63(1), pages 59-83, October.
    6. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2007. "The external wealth of nations mark II: Revised and extended estimates of foreign assets and liabilities, 1970-2004," Journal of International Economics, Elsevier, vol. 73(2), pages 223-250, November.
    7. Akira Ariyoshi & Andrei A Kirilenko & Inci Ötker & Bernard J Laurens & Jorge I Canales Kriljenko & Karl F Habermeier, 2000. "Capital Controls; Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund.
    8. Barry Eichengreen & Ricardo Hausmann, 1999. "Exchange rates and financial fragility," Proceedings - Economic Policy Symposium - Jackson Hole, Federal Reserve Bank of Kansas City, pages 329-368.
    9. Sebastian Edwards, 2007. "Introduction to "Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences"," NBER Chapters,in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 1-18 National Bureau of Economic Research, Inc.
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    Cited by:

    1. Zhang, Longmei & Zoli, Edda, 2016. "Leaning against the wind: Macroprudential policy in Asia," Journal of Asian Economics, Elsevier, vol. 42(C), pages 33-52.
    2. Pierre-Richard Agénor & Luiz A. Pereira da Silva, 2013. "Inflation Targeting and Financial Stability: A Perspective from the Developing World," Working Papers Series 324, Central Bank of Brazil, Research Department.
    3. 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.
    4. Bruno, Valentina & Shim, Ilhyock & Shin, Hyun Song, 2017. "Comparative assessment of macroprudential policies," Journal of Financial Stability, Elsevier, vol. 28(C), pages 183-202.
    5. Broos, Menno & Ghalanos, Michalis & Kennedy, Bernard & Landbeck, Alexander & Lerner, Christina & Menezes, Paula & Schiavone, Alessandro & Tilley, Thomas & Viani, Francesca & Reinhardt, Dennis & Metzem, 2016. "Dealing with large and volatile capital flows and the role of the IMF," Occasional Paper Series 180, European Central Bank.
    6. Pornpinun Chantapacdepong & Ilhyock Shim, 2014. "Correlations across Asia-Pacific bond markets and the impact of capital flow measures," BIS Working Papers 472, Bank for International Settlements.
    7. Chalongphob Sussangkarn, 2017. "Managing Economic Stability under Volatile Capital Flows: East Asia Perspectives," Asian Economic Papers, MIT Press, vol. 16(1), pages 174-192, Winter/Sp.
    8. Sen Gupta, Abhijit & Sengupta, Rajeswari, 2014. "Capital Flows and Capital Account Management in Selected Asian Economies," MPRA Paper 80330, University Library of Munich, Germany, revised 01 Apr 2016.
    9. Hal Hill & Maria Socorro Gochoco- Bautista, 2013. "Perspectives and issues," Chapters,in: Asia Rising, chapter 1, pages 3-45 Edward Elgar Publishing.
    10. Gochoco-Bautista, Maria Socorro & Francisco, Ruth H., 2011. "Effectiveness of Capital Restrictions: Do Regional and Income Differences Matter?," ADB Economics Working Paper Series 261, Asian Development Bank.
    11. Gochoco-Bautista, Maria Socorro & Remolona, Eli M., 2012. "Going Regional: How to Deepen ASEAN's Financial Markets," ADB Economics Working Paper Series 300, Asian Development Bank.
    12. Jongwanich, Juthathip & Kohpaiboon, Archanun, 2012. "Effectiveness of Capital Controls: Evidence from Thailand," Asian Development Review, Asian Development Bank, vol. 29(2), pages 50-93.

    More about this item

    Keywords

    capital flows; capital controls; financial integration;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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