IDEAS home Printed from https://ideas.repec.org/a/taf/intecj/v22y2008i2p163-185.html
   My bibliography  Save this article

The interaction between capital controls and exchange rate regimes: evidence from developing countries

Author

Listed:
  • Jurgen Von Hagen
  • Jizhong Zhou

Abstract

This paper provides an empirical analysis of the interaction between capital controls and exchange rate policies in developing countries in the 1980s and 1990s. We estimate a simultaneous-equations panel mixed logit model for the joint determination of two decisions. We find strong influences from de jure exchange rate regimes on capital account policies but somewhat weaker feedback impacts. With de facto exchange rate regimes the influences in both directions are similar to each other.

Suggested Citation

  • Jurgen Von Hagen & Jizhong Zhou, 2008. "The interaction between capital controls and exchange rate regimes: evidence from developing countries," International Economic Journal, Taylor & Francis Journals, vol. 22(2), pages 163-185.
    • Handle: RePEc:taf:intecj:v:22:y:2008:i:2:p:163-185
    DOI: 10.1080/10168730802079698
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730802079698
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/10168730802079698?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to look for a different version below or search for a different version of it.

    Other versions of this item:

    References listed on IDEAS

    as
    1. Guillermo A. Calvo & Carmen M. Reinhart, 2002. "Fear of Floating," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 117(2), pages 379-408.
    2. Sebastian Edwards, 1996. "The Determinants of the Choice between Fixed and Flexible Exchange-Rate Regimes," NBER Working Papers 5756, National Bureau of Economic Research, Inc.
    3. Michael P. Dooley, 1996. "A Survey of Literature on Controls over International Capital Transactions," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 639-687, December.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 119(1), pages 1-48.
    5. Helge Berger & Jan-Egbert Sturm & Jakob de Haan & Jakob de Haan, 2001. "Capital Controls and Exchange Rate Regimes: An Empirical Investigation," CESifo Working Paper Series 433, CESifo.
    6. von Hagen, Jurgen & Zhou, Jizhong, 2005. "The determination of capital controls: Which role do exchange rate regimes play?," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 227-248, January.
    7. Eijffinger,Sylvester C. W. & Huizinga,Harry P. (ed.), 1998. "Positive Political Economy," Cambridge Books, Cambridge University Press, number 9780521572156.
    8. Vittorio Grilli & Gian Maria Milesi-Ferretti, 1995. "Economic Effects and Structural Determinants of Capital Controls," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 517-551, September.
    9. Razin, Assaf & Sadka, Efraim, 1991. "Efficient investment incentives in the presence of capital flight," Journal of International Economics, Elsevier, vol. 31(1-2), pages 171-181, August.
    10. Jacques Miniane, 2004. "A New Set of Measures on Capital Account Restrictions," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-4.
    11. Mr. Jonathan David Ostry & Ms. Anne Marie Gulde & Mr. Atish R. Ghosh & Holger C. Wolf, 1995. "Does the Nominal Exchange Rate Regime Matter?," IMF Working Papers 1995/121, International Monetary Fund.
    12. Bai, Chong-en & Wei, Shang-Jin, 2001. "The quality of bureaucracy and capital account policies," Policy Research Working Paper Series 2575, The World Bank.
    13. Levy-Yeyati, Eduardo & Sturzenegger, Federico, 2005. "Classifying exchange rate regimes: Deeds vs. words," European Economic Review, Elsevier, vol. 49(6), pages 1603-1635, August.
    14. Ms. Natalia T. Tamirisa & Mr. R. B. Johnston, 1998. "Why Do Countries Use Capital Controls?," IMF Working Papers 1998/181, International Monetary Fund.
    15. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521747387.
    16. Alberto Alesina & Vittorio Grilli & Gian Maria Milesi-Ferretti, 1993. "The Political Economy of Capital Controls," NBER Working Papers 4353, National Bureau of Economic Research, Inc.
    17. Mr. Paolo Mauro & Miss Grace Juhn, 2002. "Long-Run Determinants of Exchange Rate Regimes: A Simple Sensitivity Analysis," IMF Working Papers 2002/104, International Monetary Fund.
    18. repec:rus:hseeco:181565 is not listed on IDEAS
    19. John Williamson, 2000. "Exchange Rate Regimes for Emerging Markets: Reviving the Intermediate Option," Peterson Institute Press: All Books, Peterson Institute for International Economics, number pa60, April.
    20. Stanley Fischer, 2001. "Exchange Rate Regimes: Is the Bipolar View Correct?," Journal of Economic Perspectives, American Economic Association, vol. 15(2), pages 3-24, Spring.
    21. Atish R. Ghosh & Anne-Marie Gulde & Holger C. Wolf, 2003. "Exchange Rate Regimes: Choices and Consequences," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262072408, April.
    22. Quinn, Dennis, 1997. "The Correlates of Change in International Financial Regulation," American Political Science Review, Cambridge University Press, vol. 91(3), pages 531-551, September.
    23. Bernhard, William & Leblang, David, 1999. "Democratic Institutions and Exchange-rate Commitments," International Organization, Cambridge University Press, vol. 53(1), pages 71-97, January.
    24. Zhou, Jizhong & von Hagen, Jürgen, 2004. "Fear of floating and fear of pegging: An empirical anaysis of de facto exchange rate regimes in developing countries," ZEI Working Papers B 31-2004, University of Bonn, ZEI - Center for European Integration Studies.
    25. von Hagen, Jurgen & Zhou, Jizhong, 2004. "The Choice of Exchange Rate Regime in Developing Countries: A Multinational Panel Analysis," CEPR Discussion Papers 4227, C.E.P.R. Discussion Papers.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Levy Yeyati, Eduardo & Sturzenegger, Federico & Reggio, Iliana, 2010. "On the endogeneity of exchange rate regimes," European Economic Review, Elsevier, vol. 54(5), pages 659-677, July.
    2. Demosthenes N. Tambakis, 2007. "Fear of Floating and Social Welfare," International Journal of Central Banking, International Journal of Central Banking, vol. 3(3), pages 183-204, September.
    3. Kimakova, Alena, 2008. "The political economy of exchange rate regime determination: Theory and evidence," Economic Systems, Elsevier, vol. 32(4), pages 354-371, December.
    4. Raul Razo-Garcia, 2011. "The Duration of Intermediate Exchange Rate Regimes and Capital Controls," Carleton Economic Papers 11-01, Carleton University, Department of Economics, revised 17 Oct 2011.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. von Hagen, Jurgen & Zhou, Jizhong, 2005. "The determination of capital controls: Which role do exchange rate regimes play?," Journal of Banking & Finance, Elsevier, vol. 29(1), pages 227-248, January.
    2. von Hagen, Jurgen & Zhou, Jizhong, 2004. "The Choice of Exchange Rate Regime in Developing Countries: A Multinational Panel Analysis," CEPR Discussion Papers 4227, C.E.P.R. Discussion Papers.
    3. Alexis Cruz-Rodriguez, 2013. "Choosing and Assessing Exchange Rate Regimes: a Survey of the Literature," Revista de Analisis Economico – Economic Analysis Review, Universidad Alberto Hurtado/School of Economics and Business, vol. 28(2), pages 37-61, October.
    4. von Hagen, Jurgen & Zhou, Jizhong, 2007. "The choice of exchange rate regimes in developing countries: A multinomial panel analysis," Journal of International Money and Finance, Elsevier, vol. 26(7), pages 1071-1094, November.
    5. Coudert, Virginie & Dubert, Marc, 2005. "Does exchange rate regime explain differences in economic results for Asian countries?," Journal of Asian Economics, Elsevier, vol. 16(5), pages 874-895, October.
    6. Levy Yeyati, Eduardo & Sturzenegger, Federico & Reggio, Iliana, 2010. "On the endogeneity of exchange rate regimes," European Economic Review, Elsevier, vol. 54(5), pages 659-677, July.
    7. von Hagen, Jürgen & Zhou, Jizhong, 2004. "The choice of exchange rate regimes in developing countries: A mulitnominal panal analysis," ZEI Working Papers B 32-2004, University of Bonn, ZEI - Center for European Integration Studies.
    8. A. Bénassy-Quéré & B. Cœuré, 2002. "The Survival of Intermediate Exchange rate Regimes," THEMA Working Papers 2002-11, THEMA (THéorie Economique, Modélisation et Applications), Université de Cergy-Pontoise.
    9. Jacques Miniane & John H. Rogers, 2007. "Capital Controls and the International Transmission of U.S. Money Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1003-1035, August.
    10. Mohamed Sfia, 2011. "The choice of exchange rate regimes in the MENA countries: a probit analysis," International Economics and Economic Policy, Springer, vol. 8(3), pages 275-305, September.
    11. Mr. Aasim M. Husain & Mr. Ashoka Mody & Nienke Oomes & Mr. Robin Brooks & Mr. Kenneth Rogoff, 2003. "Evolution and Performance of Exchange Rate Regimes," IMF Working Papers 2003/243, International Monetary Fund.
    12. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    13. Markiewicz, Agnieszka, 2006. "Choice of exchange rate regime in transition economies: An empirical analysis," Journal of Comparative Economics, Elsevier, vol. 34(3), pages 484-498, September.
    14. Esaka, Taro, 2010. "Exchange rate regimes, capital controls, and currency crises: Does the bipolar view hold?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 20(1), pages 91-108, February.
    15. Rita Fradique Lourenço, 2004. "Exchange Rate Regimes: A Global Picture Since the Emerging Market Crises in the Mid 1990s," Economic Bulletin and Financial Stability Report Articles and Banco de Portugal Economic Studies, Banco de Portugal, Economics and Research Department.
    16. Agnieszka Markiewicz, 2006. "How Central and Eastern European Countries Choose Exchange Rate Regimes," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 2, pages 69-84.
    17. Ito, Hiro & Kawai, Masahiro, 2014. "Determinants of the Trilemma Policy Combination," ADBI Working Papers 456, Asian Development Bank Institute.
    18. Tamgac, Unay, 2013. "Duration of fixed exchange rate regimes in emerging economies," Journal of International Money and Finance, Elsevier, vol. 37(C), pages 439-467.
    19. Mohammad Karimi & Marcel-Cristian Voia, 2014. "Currency Crises, Exchange Rate Regimes and Capital Account Liberalization: A Duration Analysis Approach," Dynamic Modeling and Econometrics in Economics and Finance, in: Frauke Schleer-van Gellecom (ed.), Advances in Non-linear Economic Modeling, edition 127, pages 233-262, Springer.
    20. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2009. "Financial Globalization: A Reappraisal," Panoeconomicus, Savez ekonomista Vojvodine, Novi Sad, Serbia, vol. 56(2), pages 143-197.

    More about this item

    Keywords

    capital controls; exchange rate regimes; simultaneous equations model; panel mixed logit model;
    All these keywords.

    JEL classification:

    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • C35 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Discrete Regression and Qualitative Choice Models; Discrete Regressors; Proportions
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:22:y:2008:i:2:p:163-185. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RIEJ20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.