Are Capital Controls Prudential? An Empirical Investigation
Andrés Fernández Martin (),
Alessandro Rebucci () and
Martín Uribe ()
No 19671, NBER Working Papers from National Bureau of Economic Research, Inc
A growing recent theoretical literature advocates the use of prudential capital control policy, that is, the tightening of restrictions on cross-border capital flows during booms and the relaxation thereof during recessions. We examine the behavior of capital controls in a large number of countries over the period 1995-2011. We find that capital controls are remarkably acyclical. Boom-bust episodes in output, the current account, or the real exchange rate are associated with virtually no movements in capital controls. These results are robust to decomposing boom-bust episodes along a number of dimensions, including the level of development, the level of external indebtedness, or the exchange-rate regime. We also document a near complete acyclicality of capital controls during the Great Contraction of 2007-2009.
JEL-codes: E6 F3 F4 F5 G0 G1 (search for similar items in EconPapers)
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Published as Journal of Monetary Economics Volume 76, November 2015, Pages 1–14 Cover image Are capital controls countercyclical? Andrés Fernándeza, , Alessandro Rebuccib, , Martín Uribec, d, ,
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Working Paper: Are Capital Controls Prudential? An Empirical Investigation (2014)
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