Effectiveness of Capital Outflow Restrictions
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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. 2014/008
Subject:
Balance of payments Capital controls Capital flows Capital outflows Econometric analysis Industrial production Production Vector autoregression
English
Publication Date:
January 21, 2014
ISBN/ISSN:
9781484379752/1018-5941
Stock No:
WPIEA2014008
Pages:
34
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