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

32 Pages Posted: 26 Feb 2008  

Roald J. Versteeg

University of London - Economics, Mathematics and Statistics

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)

University of London - Economics, Mathematics and Statistics ( email )

Malet Street
London, WC1E 7HX
United Kingdom

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