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Modelling Portfolio Capital Flows in a Global Framework: Multilateral Implications of Capital Controls

Gianna Boero (), Zeyyad Mandalinci () and Mark Taylor ()

No 11689, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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 construct a comprehensive global econometric model which captures the dynamic interactions of capital flows with domestic and global fundamentals, and to assess the efficacy of capital controls and potential deflection effects on other countries. The results suggest that capital controls areeffective 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: capital controls; emerging markets; Global VAR (GVAR); Portfolio Capital Flows (search for similar items in EconPapers)
JEL-codes: C32 C5 F32 F42 G11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-mon
Date: 2016-12
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Journal Article: Modelling portfolio capital flows in a global framework: Multilateral implications of capital controls (2019) Downloads
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