Economic Effects and Structural Determinants of Capital Controls

By Vittorio Grilli, Gian M Milesi-Ferretti

March 1, 1995

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Vittorio Grilli, and Gian M Milesi-Ferretti. Economic Effects and Structural Determinants of Capital Controls, (USA: International Monetary Fund, 1995) accessed November 8, 2024

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 studies determinants and effects of capital controls using a panel of 61 developed and developing countries. The results suggest that capital account restrictions are more likely to be in place in countries with low income, a large share of government, and where the central bank is not independent. Other determinants of controls include the exchange rate regime, current account imbalances and the degree of openness of the economy. We also find that capital controls and other foreign exchange restrictions are associated with higher inflation and lower real interest rates. We do not find any robust correlation between our measures of controls and the rate of growth, although there is evidence that countries with large black market premia grow more slowly.

Subject: Balance of payments, Capital controls, Current account, Exchange restrictions, Financial services, Foreign exchange, Inflation, Prices, Real interest rates

Keywords: Africa, Capital control, Capital controls, Capital mobility, Capital transaction, Central bank, Country effect, Current account, Determinants of capital control, Exchange rate, Exchange restrictions, Foreign exchange, Government change, Government policy, Government preference, Government pressure, Inflation, Rate of inflation, Rate of return, Real interest rates, Return on assets, WP

Publication Details

Pages:

48
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1995/031
Stock No:

WPIEA0311995
ISBN:

9781451844993
ISSN:

1018-5941

Notes

Study based on a panel of 61 developing and developed countries. Also published in Staff Papers, Vol. 42, No. 3, September 1995.

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