 Capital outflow restrictions and dollar drainageUluc Aysun, Karlia Clarke and Oronde Small Economic Systems, 2024, vol. 48, issue 2 Abstract: This paper identifies foreign cross-listings as a potential drain on reserves and a source of vulnerability to capital reversals for host nations. Simulations of a reasonably calibrated portfolio choice model demonstrate that restrictions on the outflow side of capital markets are most effective in mitigating this vulnerability for Jamaica. A panel data and Jamaica specific empirical analysis that distinguishes between outflow and inflow restrictions shows that it is inflow, and not outflow, restrictions that are negatively related to the total amount of capital in the economy. Outflow restrictions, therefore, are preferable to inflow restrictions as they prevent reserve drainage without stunting capital market growth. Institution-level evidence, however, indicates that outflow restrictions limit local financial institutions’ ability to hedge local and global risks. Keywords: Developing countries; Capital flows; Restrictions; Portfolio choice; Panel estimation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:48:y:2024:i:2:s0939362523001152 DOI: 10.1016/j.ecosys.2023.101176 Access Statistics for this article Economic Systems is currently edited by R. Frensch More articles in Economic Systems from Elsevier Contact information at EDIRC. |
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