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Modelling portfolio capital flows in a global framework: Multilateral implications of capital controls

Gianna Boero, Zeyyad Mandalinci and Mark Taylor ()

Journal of International Money and Finance, 2019, vol. 90, issue C, 142-160

Abstract: In the aftermath of the global financial crisis, many emerging market countries resorted to capital controls to tackle the excessive surge of capital inflows. A number of recent research papers have suggested that the imposition of controls may have imposed negative externalities on other countries by deflecting flows. Our aim in the research reported in this paper is to assess the efficacy of capital controls and potential deflection effects on other countries by constructing a comprehensive global econometric model which captures the dynamic interactions of capital flows with domestic and global fundamentals. The results suggest that capital controls are effective for some countries in the short run, but have no lasting effects. Moreover, there is only limited evidence of deflection effects for a small number of emerging market countries.

Keywords: Portfolio capital flows; Global VAR (GVAR); Capital controls; Emerging markets (search for similar items in EconPapers)
JEL-codes: C32 C5 F32 F42 G11 (search for similar items in EconPapers)
Date: 2019
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Working Paper: Modelling Portfolio Capital Flows in a Global Framework: Multilateral Implications of Capital Controls (2016) Downloads
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