IMF Working Papers

Do Capital Controls Limit Inflow Surges?

By Apoorv Bhargava, Romain Bouis, Annamaria Kokenyne, Manuel Perez-Archila, Umang Rawat, Ratna Sahay

March 10, 2023

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Apoorv Bhargava, Romain Bouis, Annamaria Kokenyne, Manuel Perez-Archila, Umang Rawat, and Ratna Sahay. Do Capital Controls Limit Inflow Surges?, (USA: International Monetary Fund, 2023) accessed September 18, 2024

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary

With rising financial integration, the magnitude and swings in capital flows have increased in the past two decades, intensifying the policy debate on how best to deal with these flows. This paper assesses the use and effectiveness of capital controls in limiting inflow surges. Using a novel dataset on capital control changes across 40 advanced and emerging market and developing economies over 1995-2018, we find that the tightening of capital controls reduces the probability of future surges both at the aggregate and the asset flow levels. The results are robust to various definitions of surges and are stronger when controls are matched to the asset class they target. Finally, we also find significant multilateral spillovers from capital control actions, pointing towards the need for international cooperation in the use of these policies.

Keywords: Capital controls, Capital inflows, Surges

Publication Details

  • Pages:

    40

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

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  • Series:

    Working Paper No. 2023/050

  • Stock No:

    WPIEA2023050

  • ISBN:

    9798400235092

  • ISSN:

    1018-5941