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Capital controls and capital flows: Do controls reduce the size of flows?

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  • Chen, Gao

Abstract

This paper examines the effectiveness of capital controls in limiting the size of capital outflows based on a large panel data that covers 98 countries from 1995 to 2015. Results in this paper show that imposing comprehensive capital controls that put restrictions on almost all assets categories is the necessary condition to stem outflows. In addition, comprehensive capital controls can also be imposed temporarily to reduce outflows even though a country had a fairly open capital account in the past. This provides policy rationale for using capital controls as a temporary tool to alter outflows when needed. Lastly, on targeting a particular type of asset flows, this paper finds that countries are able to reduce banking flows by closing assets channels that affect banking flows only.

Suggested Citation

  • Chen, Gao, 2024. "Capital controls and capital flows: Do controls reduce the size of flows?," Journal of International Money and Finance, Elsevier, vol. 145(C).
    • Handle: RePEc:eee:jimfin:v:145:y:2024:i:c:s0261560624000780
    DOI: 10.1016/j.jimonfin.2024.103091
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    References listed on IDEAS

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    1. Bilge Erten & Anton Korinek & José Antonio Ocampo, 2021. "Capital Controls: Theory and Evidence," Journal of Economic Literature, American Economic Association, vol. 59(1), pages 45-89, March.
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    More about this item

    JEL classification:

    • F3 - International Economics - - International Finance
    • F4 - International Economics - - Macroeconomic Aspects of International Trade and Finance
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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