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A Simple Measure of the Intensity of Capital Controls

Hali Edison () and Francis Warnock

No 708, International Finance Discussion Papers from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We propose a monthly measure of the intensity of capital controls across 29 emerging markets. Our measure, which is based on restrictions on foreign ownership of equities, provides information on the extent and evolution of financial liberalization. Using the measure, we show that a complete liberalization results in a much sharper decrease in the cost of capital than previously reported, but following a partial liberalization the cost of capital increases. Moreover, the more complete the liberalization is, the greater are the subsequent exchange rate appreciation and capital inflows.

Keywords: Emerging markets; International financial liberalization; Openness; Cost of capital (search for similar items in EconPapers)
JEL-codes: F3 G15 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn
Date: 2001, Revised 2002-10
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Journal Article: A simple measure of the intensity of capital controls (2003) Downloads
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