Effectiveness of Capital Outflow Restrictions

Christian Saborowski, Sarah Sanya, Hans Weisfeld and Juan Yepez

No 2014/008, IMF Working Papers from International Monetary Fund

Abstract: This paper examines the effectiveness of capital outflow restrictions in a sample of 37 emerging market economies during the period 1995-2010, using a panel vector autoregression approach with interaction terms. Specifically, it examines whether a tightening of outflow restrictions helps reduce net capital outflows. We find that such tightening is effective if it is supported by strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive. When none of these three conditions is fulfilled, a tightening of restrictions fails to reduce net outflows as it provokes a sizeable decline in gross inflows, mainly driven by foreign investors.

Keywords: WP; outflow control index; capital; outflow restriction; Capital flows; Capital controls; Emerging economies; inflow control intensity; flow variable; control tightening; capital flow restriction; interest rate stabilization; outflow control restriction; Capital outflows; Industrial production; Vector autoregression; Global (search for similar items in EconPapers)
Pages: 34
Date: 2014-01-21
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Citations: View citations in EconPapers (14)

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