Effectiveness of Capital Outflow Restrictions

Author/Editor:

Christian Saborowski ; Sarah Sanya ; Hans Weisfeld ; Juan Yepez

Publication Date:

January 21, 2014

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

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.

Series:

Working Paper No. 14/8

Subject:

English

Publication Date:

January 21, 2014

ISBN/ISSN:

9781484379752/1018-5941

Stock No:

WPIEA2014008

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

34

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