Capital Outflow Restrictions and Dollar Drainage

Uluc Aysun, Karlia Clarke () and Oronde Small ()
Additional contact information
Karlia Clarke: Bank of Jamaica, Kingston, Jamaica
Oronde Small: Bank of Jamaica, Kingston, Jamaica

No 2022-02, Working Papers from University of Central Florida, Department of Economics

Abstract: This paper identifies foreign cross-listings as a potential drain on reserves and a source of vulnerability to capital reversals for host nations. Simulations of a portfolio choice model demonstrate that restrictions on the outflow side of capital markets are most effective in mitigating this vulnerability. A panel data analysis that distinguishes between outflow and inflow restrictions shows that it is inflow restrictions that have a net negative effect on the total amount of capital in the economy. Outflow restrictions, therefore, are preferable to inflow restrictions as they limit reserve drainage without stunting capital market growth.

Keywords: developing countries; capital ows; restrictions; portfolio choice; panel estimation. (search for similar items in EconPapers)
JEL-codes: E44 F33 G11 O16 (search for similar items in EconPapers)
Pages: 46 Pages
Date: 2022-10
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Journal Article: Capital outflow restrictions and dollar drainage (2024)
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