Capital Flow Management Measures: What Are They Good For?

Kristin Forbes, Marcel Fratzscher and Roland Straub

No 20860, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Are capital controls and macroprudential measures related to international exposures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures related to international transactions from 2009 to 2011 for 60 countries. Results show that these macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals—but most popular measures are not “good for” accomplishing their stated aims

JEL-codes: F3 F4 F5 G0 G1 (search for similar items in EconPapers)
Date: 2015-01
New Economics Papers: this item is included in nep-ifn and nep-opm
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Citations: View citations in EconPapers (186)

Published as Forbes, Kristin & Fratzscher, Marcel & Straub, Roland, 2015. "Capital-flow management measures: What are they good for?," Journal of International Economics, Elsevier, vol. 96(S1), pages S76-S97.

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Related works:
Journal Article: Capital-flow management measures: What are they good for? (2015)
Chapter: Capital-flow Management Measures: What Are They Good For? (2014)
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