Abstract

http://ssrn.com/abstract=2364486
 


 



Capital Controls and Macroprudential Measures: What Are They Good For?


Kristin J. Forbes


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Marcel Fratzscher


DIW Berlin; Centre for Economic Policy Research (CEPR)

Roland Straub


European Central Bank (ECB)

December 1, 2013

MIT Sloan Research Paper No. 5061-13

Abstract:     
Are capital controls and macroprudential measures successful in achieving their objectives? Assessing their effectiveness is complicated by selection bias and endogeneity; countries which change their capital-flow management measures (CFMs) often share specific characteristics and are responding to changes in variables that the CFMs are intended to influence. This paper addresses these challenges by using a propensity-score matching methodology. We also create a new database with detailed information on weekly changes in controls on capital inflows, capital outflows, and macroprudential measures from 2009 to 2011 for 60 countries. Results show that macroprudential measures can significantly reduce some measures of financial fragility. Most CFMs do not significantly affect other key targets, however, such as exchange rates, capital flows, interest-rate differentials, inflation, equity indices, and different volatilities. One exception is that removing controls on capital outflows may reduce real exchange rate appreciation. Therefore, certain CFMs can be effective in accomplishing specific goals — but most popular measures are not “good for” accomplishing their stated aims.

Number of Pages in PDF File: 56

Keywords: capital controls, macroprudential measures, propensity-score matching, selection bias, capital flows, emerging markets

JEL Classification: F3, F4, F5, G0, G1

working papers series


Download This Paper

Date posted: March 7, 2014  

Suggested Citation

Forbes, Kristin J. and Fratzscher, Marcel and Straub, Roland, Capital Controls and Macroprudential Measures: What Are They Good For? (December 1, 2013). MIT Sloan Research Paper No. 5061-13. Available at SSRN: http://ssrn.com/abstract=2364486 or http://dx.doi.org/10.2139/ssrn.2364486

Contact Information

Kristin J. Forbes (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
Room E62-416
Cambridge, MA 02142
United States
617-253-8996 (Phone)
HOME PAGE: http://web.mit.edu/kjforbes/www
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Marcel Fratzscher
DIW Berlin ( email )
Mohrenstraße 58
Berlin, 10117
Germany
Centre for Economic Policy Research (CEPR) ( email )
77 Bastwick Street
London, EC1V 3PZ
United Kingdom
Roland Straub
European Central Bank (ECB) ( email )
Kaiserstrasse 29
Frankfurt am Main, D-60311
Germany
Feedback to SSRN


Paper statistics
Abstract Views: 419
Downloads: 90
Download Rank: 164,574

© 2014 Social Science Electronic Publishing, Inc. All Rights Reserved.  FAQ   Terms of Use   Privacy Policy   Copyright   Contact Us
This page was processed by apollo4 in 0.454 seconds