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Domestic and multilateral effects of capital controls in emerging markets

Gurnain Pasricha (), Matteo Falagiarda, Martin Bijsterbosch and Joshua Aizenman ()

Journal of International Economics, 2018, vol. 115, issue C, 48-58

Abstract: Using a novel, high frequency dataset on capital control actions in 16 emerging market economies (EMEs) from 2001 to 2012, we provide new evidence on the domestic and multilateral effects of capital controls. Increases in capital account openness reduce monetary policy autonomy and increase exchange rate stability, confirming the constraints of the monetary policy trilemma. Both gross in- and outflows rise, while the effect on net capital flows is ambiguous. Tighter capital inflow restrictions generated significant spillovers, especially in the post-2008 environment of abundant global liquidity. We also find evidence of a domestic policy response to foreign capital control changes in countries that are affected by these spillovers.

Keywords: Capital controls; Capital flows; Monetary policy trilemma; Cross-border spillovers (search for similar items in EconPapers)
JEL-codes: F32 G15 F41 F42 (search for similar items in EconPapers)
Date: 2018
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Related works:
Working Paper: Domestic and Multilateral Effects of Capital Controls in Emerging Markets (2015) Downloads
Working Paper: Domestic and multilateral effects of capital controls in emerging markets (2015) Downloads
Working Paper: Domestic and Multilateral Effects of Capital Controls in Emerging Markets (2015) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:115:y:2018:i:c:p:48-58

DOI: 10.1016/j.jinteco.2018.08.005

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