Regulating Capital Flows at Both Ends: Does it Work?
IMF Working Papers, October 17, 2014
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- Regulating Capital Flows at Both Ends: Does it Work?
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Bibliographic details
- Authors: Atish R. Ghosh, Mahvash S Qureshi, Naotaka Sugawara
- Published: October 17, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498358743.001
Research question and scope
- Examines whether cross-border capital flows can be regulated by imposing capital account restrictions (CARs) in both source and recipient countries.
- Historical inspiration: original advocacy by John Maynard Keynes and Harry Dexter White.
- Sample and timeframe:
- Bilateral cross-border bank flows from 31 source to 76 recipient (advanced and emerging market) countries.
- Period: 1995–2012.
Data and methodology
- Combines bilateral cross-border bank flow data with a new and comprehensive dataset on various outflow and inflow related capital controls and prudential measures in the sampled countries.
- Focus: impact of CARs and prudential measures on the volume of cross-border bank flows.
Key findings
- CARs at either end (source or recipient) can significantly influence the volume of cross-border bank flows.
- Restrictions imposed at both ends are associated with a larger reduction in flows than restrictions at only one end.
- Evidence of cross-border spillovers:
- Inflow restrictions imposed by countries are associated with larger flows to other countries (i.e., diversion effects).
Policy implications and recommendations
- Findings suggest useful scope for policy coordination:
- Between source and recipient countries to better manage potentially disruptive flows.
- Among recipient countries to address spillovers and diversion effects.
- Coordination could improve management of cross-border banking flows and reduce unintended redirection of capital.
Content in this bundle
- Microsoft Word - WP-CB flows-18Oct2014.docx