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How Effective Are Capital Controls?

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Author Info
Sebastian Edwards

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Abstract

A number of authors have recently argued that, in order to avoid financial instability, emerging countries should rely on capital controls. Two type of controls have been considered: controls on capital outflows, and controls on capital inflows. In this paper I review the historical evidence on the effectiveness of these two type of controls. I argue that controls on outflows have been ineffective. They are circumvented and breed corruption. I also analyze Chile's recent experience with controls on inflows, and I argue that their effectiveness has been exaggerated.

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Publisher Info
Article provided by American Economic Association in its journal Journal of Economic Perspectives.

Volume (Year): 13 (1999)
Issue (Month): 4 (Fall)
Pages: 65-84
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Handle: RePEc:aea:jecper:v:13:y:1999:i:4:p:65-84

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Alesina, Alberto F & Grilli, Vittorio & Milesi-Ferretti, Gian Maria, 1993. "The Political Economy of Capital Controls," CEPR Discussion Papers 793, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  2. Rudiger Dornbusch & Sebastian Edwards, 1991. "Macroeconomic Populism in Latin America," NBER Working Papers 2986, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  3. Kenneth Rogoff, 1999. "International Institutions for Reducing Global Financial Instability," NBER Working Papers 7265, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  4. Dornbusch, Rudiger & Edwards, Sebastian, 1989. "The macroeconomics of populism in Latin America," Policy Research Working Paper Series 316, The World Bank. [Downloadable!]
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  5. James Tobin, 1978. "A Proposal for International Monetary Reform," Cowles Foundation Discussion Papers 506, Cowles Foundation, Yale University. [Downloadable!]
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  6. Fischer, S. & Cooper, R.N. & Dornbusch, R. & Garber, P.M. & Massad, C. & Polak, J.J. & Rodrik, D. & Tarapore, S.S., 1998. "Should the IMF Pursue Capital-Account Convertibility?," Princeton Essays in International Economics 207, International Economics Section, Departement of Economics Princeton University,.
  7. Marcelo Soto & Salvador Valdés, 1996. "¿Es el Control Selectivo de Capitales Efectivo en Chile? Su Efecto sobre el Tipo de Cambio Real," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(98), pages 77-108. [Downloadable!]
  8. Michael P. Dooley & Donald J. Mathieson & Liliana Rojas-Suarez, 1997. "Capital Mobility and Exchange Market Intervention in Developing Countries," NBER Working Papers 6247, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  9. Maurice Obstfeld, 1988. "International Finance," NBER Working Papers 2077, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Graciela L. Kaminsky & Carmen M. Reinhart, 1996. "The twin crises: the causes of banking and balance-of-payments problems," International Finance Discussion Papers 544, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
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  11. Sebastian Edwards, 1998. "Capital Flows, Real Exchange Rates, and Capital Controls: Some Latin American Experiences," NBER Working Papers 6800, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  12. Salvador Valdés-Prieto & Marcelo Soto, 1998. "The Effectiveness of Capital Controls: Theory and Evidence from Chile," Empirica, Springer, vol. 25(2), pages 133-164, January. [Downloadable!] (restricted)
  13. Sebastian Edwards, 1998. "Interest Rate Volatily, Contagion and Convergence: And Empirical Investigation of the Cases of Argentina, Chile and México," Journal of Applied Economics, Universidad del CEMA, vol. 0, pages 55-86, November. [Downloadable!]
  14. Montiel, Peter J, 1994. "Capital Mobility in Developing Countries: Some Measurement Issues and Empirical Estimates," World Bank Economic Review, Oxford University Press, vol. 8(3), pages 311-50, September.
  15. Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1993-1), pages 51-144. [Downloadable!]
  16. Feldstein, Martin & Horioka, Charles, 1980. "Domestic Saving and International Capital Flows," Economic Journal, Royal Economic Society, vol. 90(358), pages 314-29, June. [Downloadable!] (restricted)
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