Restrictive Policy to Curb Capital Flows Volatility

Chokri Zehri ()
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Chokri Zehri: Prince Sattam Bin Abdulaziz University, College of Sciences and Humanities in Al-Sulail, Department of Business Administration, Saudi Arabia

Journal of International Commerce, Economics and Policy (JICEP), 2021, vol. 12, issue 02, 1-30

Abstract: We examine the role of the restrictive policy, through capital controls, in reducing the capital flows volatility. The study highlights the effects of these controls to dampen international financial shocks. Using quarterly data of 28 emerging economies over the period between 1999 and 2019, three empirical approaches are applied, dynamic panel data, ARDL, and local projections models. Four indexes of capital controls have contributed to the finding that a tighter level of capital controls reduces the sensitivity of capital flows to monetary and exchange rate shocks. These findings on the benefits of capital controls are particularly asymmetric according to the differences between controls on inflows and outflows, and the differences between floating and pegged exchange rate regimes.

Keywords: Volatility; inflows; capital controls; monetary; exchange rate; shocks (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1142/S1793993321500101

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