Capital Controls and Economic Growth: How Controls on Inflows and Outflows are Different

32 Pages Posted: 26 Feb 2008

See all articles by Roald J. Versteeg

Roald J. Versteeg

Imperial College London - Accounting, Finance, and Macroeconomics

Date Written: February 14, 2008

Abstract

In order to investigate the effects of different types of capital controls on economic growth, we construct a new measure of capital controls; making this study one of the first to distinguish between controls on inflows and outflows. Contrary to previous studies, we are able to show that capital controls do have an effect on economic growth. We find that controls on capital inflows have a positive effect on economic growth, while controls on outflows have detrimental effects. Moreover, controls on equity markets are also found to have a negative impact on economic growth. These results validate the theoretical arguments made by for instance Mishkin (2001) and Bekaert, Harvey, and Lundblad (2005).

Keywords: Capital Controls, Economic Growth, Developing Countries

JEL Classification: F21, F43, O24, O40

Suggested Citation

Versteeg, Roald J., Capital Controls and Economic Growth: How Controls on Inflows and Outflows are Different (February 14, 2008). Available at SSRN: https://ssrn.com/abstract=1098261 or http://dx.doi.org/10.2139/ssrn.1098261

Roald J. Versteeg (Contact Author)

Imperial College London - Accounting, Finance, and Macroeconomics ( email )

South Kensington campus
London SW7 2AZ
United Kingdom