Why do emerging markets liberalize capital outflow controls? Fiscal versus net capital flow concerns

Joshua Aizenman and Gurnain Pasricha

Journal of International Money and Finance, 2013, vol. 39, issue C, 28-64

Abstract: In this paper, we provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in the recent decades. Liberalization of capital outflow controls can allow emerging market economies (EMEs) to reduce net capital inflow (NKI) pressures, but may cost their governments the fiscal revenues that external financial repression generates. Our results indicate that external repression revenues in EMEs declined substantially in the 2000's compared with the 1980's. In line with this decline in external repression revenues and their growth accelerations in 2000's, concerns related to net capital inflows took predominance over fiscal concerns in the decisions to liberalize capital outflow controls. Emerging markets facing high volatility in net capital inflows and higher short-term balance sheet exposures liberalized outflows less. Countries eased outflows more in response to higher stock price appreciation, higher appreciation pressures in the exchange market and higher real exchange rate volatility. Non-IT monetary policy regimes also liberalized outflows more in response to greater reserves accumulation and higher NKI.

Keywords: Capital controls; Revenues from financial repression; Capital inflows management (search for similar items in EconPapers)
JEL-codes: F32 G15 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (49)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0261560613000910
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Why Do Emerging Markets Liberalize Capital Outflow Controls? Fiscal versus Net Capital Flow Concerns (2013)
Working Paper: Why do emerging markets liberalize capital outflow controls? Fiscal versus net capital flow concerns (2013)
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:eee:jimfin:v:39:y:2013:i:c:p:28-64

DOI: 10.1016/j.jimonfin.2013.06.018

Access Statistics for this article

Journal of International Money and Finance is currently edited by J. R. Lothian

More articles in Journal of International Money and Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).