Effectiveness of Capital Outflow Restrictions

 
Author/Editor: Christian Saborowski ; Sarah Sanya ; Hans Weisfeld ; Juan Yepez
 
Publication Date: January 21, 2014
 
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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(s): Capital outflows | Emerging markets | Capital controls | Economic models | Time series

 
English
Publication Date: January 21, 2014
ISBN/ISSN: 9781484379752/1018-5941 Format: Paper
Stock No: WPIEA2014008 Pages: 34
Price:
US$18.00 (Academic Rate:
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