Capital Controls and Recovery from the Financial Crisis of the 1930s

Kris Mitchener and Kirsten Wandschneider

No 10019, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: We examine the first widespread use of capital controls in response to a global or regional financial crisis. In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their causal effects on macroeconomic recovery from the Great Depression. We find evidence that they stemmed gold outflows in the year following their imposition; however, time-shifted, difference-in-differences (DD) estimates of industrial production, prices, and exports suggest that exchange controls did not accelerate macroeconomic recovery relative to countries that went off gold and floated. Countries imposing capital controls also appear to perform similar to the gold bloc countries once the latter group of countries finally abandoned gold. Time series analysis suggests that countries imposing capital controls refrained from fully utilizing their newly acquired monetary policy autonomy.

Keywords: Capital controls; Financial crises; Great depression; Interwar gold standard (search for similar items in EconPapers)
JEL-codes: E44 E61 F32 F33 F41 G15 N1 N2 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-cba, nep-his, nep-ifn, nep-mac, nep-mon and nep-opm
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Citations: View citations in EconPapers (3)

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Related works:
Journal Article: Capital controls and recovery from the financial crisis of the 1930s (2015)
Working Paper: Capital Controls and Recovery from the Financial Crisis of the 1930s (2014)
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