Controls on Capital Inflows and the Transmission of External Shocks

Posted: 7 Nov 2008

See all articles by Antonio C. David

Antonio C. David

World Bank - Policy Research Department; International Monetary Fund (IMF)

Date Written: November 2008


In this paper we attempt to analyse whether price-based controls on capital inflows are successful in insulating economies against external shocks. We present results from vector autoregressive (VAR) models, which indicate that Chile and Colombia, countries that adopted controls on capital inflows, seem to have been relatively well insulated against certain types of external disturbances. Subsequently, we use the autoregressive distributive lag (ARDL) approach to co-integration in order to isolate the effects of the capital controls on the pass-through of external disturbances to domestic interest rates in those economies. We conclude that there is evidence that the capital controls have allowed for greater policy autonomy.

Keywords: Capital flows, Capital controls, Developing countries, E60, F33, F34, O16, O54

Suggested Citation

David, Antonio C., Controls on Capital Inflows and the Transmission of External Shocks (November 2008). Cambridge Journal of Economics, Vol. 32, Issue 6, pp. 887-906, 2008, Available at SSRN: or

Antonio C. David (Contact Author)

World Bank - Policy Research Department ( email )

1818 H Street
Washington, DC 20433
United States

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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