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Financial flows, macro-prudential policies, capital restrictions and institutions: what do gravity equations tell us?

Jean-Charles Bricongne (), Antoine Cosson, Albane Garnier-Sauveplane, Remy Lecat (), Irena Peresa and Yuliya Vanzhulova

Working papers from Banque de France

Abstract: This paper analyzes the impact on financial flows of institutional factors promoting financial integration such as European integration or trying to tame them such as capital control or macro-prudential policies. We use a detailed database of bilateral financial assets and construct gravity models, for foreign direct investment, portfolio flows and other investments. Capital control policies have limited and disparate effects, being particularly effective through restrictions on inward flows for destination countries. The impacts of macro-prudential measures are complex, with macro-prudential measures in the origin country financial sector having a positive impact on outward capital flows and macroprudential measures in destination countries having a negative impact on inward capital flows. European integration has played a positive role on financial flows. We also emphasize the benefits of cooperation between the origin and destination countries, both for capital control and macro-prudential measures.

Keywords: Gravity Equation; International Financial Assets and Flows; Macro-Prudential Measures; Restrictions to Financial Flows; European Integration (search for similar items in EconPapers)
JEL-codes: F38 G15 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2021
New Economics Papers: this item is included in nep-cba, nep-cwa, nep-eec, nep-fdg, nep-ifn and nep-int
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Persistent link: https://EconPapers.repec.org/RePEc:bfr:banfra:842

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