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Capital controls in emerging East Asia: How do they affect investment flows?

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  • Jongwanich, Juthathip

Abstract

This study examines the effects of capital controls on investment flows using data for ten emerging East Asian economies for the period 2000–2015. Both inflows and outflows are considered and four asset classes are distinguished – direct investment, equity investment, debt security investment, and other investment (mainly loans and deposits). The results suggest that capital controls have limited effectiveness in reducing the flows to which they are directly applied. Restrictions on capital inflows are generally more effective than those on outflows. However, effects extend beyond the investment flows directly targeted by the controls. Restrictions on flows in one direction can affect flows in the opposite direction; restrictions on one asset class can affect flows of other asset classes; and restrictions applied elsewhere in the East Asia region can affect flows for particular economies within the region. Domestic macroeconomic fundamentals are also key determinants of capital flows.

Suggested Citation

  • Jongwanich, Juthathip, 2019. "Capital controls in emerging East Asia: How do they affect investment flows?," Journal of Asian Economics, Elsevier, vol. 62(C), pages 17-38.
    • Handle: RePEc:eee:asieco:v:62:y:2019:i:c:p:17-38
    DOI: 10.1016/j.asieco.2019.04.001
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    Citations

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    Cited by:

    1. Abraham,Facundo & Cortina Lorente,Juan Jose & Schmukler,Sergio L., 2020. "Growth of Global Corporate Debt : Main Facts and Policy Challenges," Policy Research Working Paper Series 9394, The World Bank.
    2. Juthathip Jongwanich & Archanun Kohpaiboon, 2020. "Effectiveness of industrial policy on firm productivity: evidence from Thai manufacturing," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 34(2), pages 39-63, November.
    3. Yang, Yi & Li, Xiao, 2021. "The quality of host government and China’s OFDI: Construction of micro-evaluation model of government quality," Journal of Asian Economics, Elsevier, vol. 74(C).
    4. Ding, Yibing & Zhang, Xiaojing & Liu, Ziwei, 2021. "Differences in returns to cross-border M&A in the short and long run: Evidence from Chinese listed firms," Journal of Asian Economics, Elsevier, vol. 74(C).

    More about this item

    Keywords

    Capital flow; Capital restrictions; Emerging Asia;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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