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Motivations for capital controls and their effectiveness

Radhika Pandey (), Gurnain Pasricha (), Ila Patnaik () and Ajay Shah ()
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Ila Patnaik: National Institute of Public Finance and Policy

Working Papers from National Institute of Public Finance and Policy

Abstract: We assess the motivations for changing capital controls and their effectiveness in India, a country where there is a comprehensive capital control system covering all crossborder transactions. We focus on foreign borrowing by firms, where systemic risk concerns could potentially play a role. A novel fine-grained data set of capital control actions is constructed. We find that capital control actions are potentially motivated by exchange rate considerations, but not by systemic risk issues. A quasi-experimental design reveals that the actions appear to have no impact either on the exchange rate or on variables connected with systemic risk.

Keywords: Capital controls; Capital flows; Exchange rate; Foreign borrowing (search for similar items in EconPapers)
JEL-codes: F38 G15 G18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-ifn and nep-rmg
Date: 2016-04
Note: Working Paper 168, 2016
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Working Paper: Motivations for Capital Controls and Their Effectiveness (2015) Downloads
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