Capital Controls on Outflows: New Evidence and a Theoretical Framework

Roberto Chang, Andrés Fernández Martin and Humberto Martinez

No 32877, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We study capital controls on outflows (CCOs) in situations of macroeconomic and financial distress. We present novel empirical evidence indicating that CCO implementation is associated with crises and declines in GDP growth. We then develop a theoretical framework that is consistent with such empirical findings and also yields policy and welfare lessons. The theory features costly coordination failures by foreign investors which can sometimes be avoided by suitably tailored CCOs. The benefits of CCOs as coordination devices can make them optimal even if CCOs entail deadweight losses; if the latter are large, however, CCOs are detrimental for welfare. We show that optimal CCOs can suffer from time inconsistency, and also how political opportunism may limit CCO policy. Hence government credibility and reputation building emerge as critical for the successful implementation of CCOs.

JEL-codes: F21 F38 F41 (search for similar items in EconPapers)
Date: 2024-08
New Economics Papers: this item is included in nep-mon and nep-opm
Note: IFM
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.nber.org/papers/w32877.pdf (application/pdf)
Access to the full text is generally limited to series subscribers, however if the top level domain of the client browser is in a developing country or transition economy free access is provided. More information about subscriptions and free access is available at http://www.nber.org/wwphelp.html. Free access is also available to older working papers.

Related works:
Working Paper: Capital Controls on Outflows: New Evidence and a Theoretical Framework (2024)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:32877

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w32877
The price is Paper copy available by mail.

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().