Effectiveness of Capital Outflow Restrictions

35 Pages Posted: 20 Feb 2014

See all articles by Sarah Sanya

Sarah Sanya

International Monetary Fund

Christian Saborowski

International Monetary Fund (IMF)

Hans Weisfeld

International Monetary Fund (IMF)

Juan F. Yépez

International Monetary Fund (IMF)

Date Written: January 2014

Abstract

This paper examines the effectiveness of capital outflow restrictions in a sample of 37 emerging market economies during the period 1995-2010, using a panel vector autoregression approach with interaction terms. Specifically, it examines whether a tightening of outflow restrictions helps reduce net capital outflows. We find that such tightening is effective if it is supported by strong macroeconomic fundamentals or good institutions, or if existing restrictions are already fairly comprehensive. When none of these three conditions is fulfilled, a tightening of restrictions fails to reduce net outflows as it provokes a sizeable decline in gross inflows, mainly driven by foreign investors.

Keywords: Capital outflows, Emerging markets, Capital controls, Economic models, Time series, Capital flows, Emerging economies, net capital, capital inflows, capital flow restrictions, net capital outflows, net capital flows, capital transactions, volatile capital flows, capital account restrictions, capital market, international capital, access to funds, inflation rate, stock market capitalization, speculative attacks, movement of capital, investor confidence, current account balance, stabilization policies

JEL Classification: E50, F3, F65

Suggested Citation

Sanya, Sarah O. and Saborowski, Christian and Weisfeld, Hans and Yépez, Juan F., Effectiveness of Capital Outflow Restrictions (January 2014). Available at SSRN: https://ssrn.com/abstract=2398811 or http://dx.doi.org/10.2139/ssrn.2398811

Sarah O. Sanya

International Monetary Fund ( email )

700 19th Street, NW
Washington, DC 22209
United States
2026239598 (Phone)

Christian Saborowski

International Monetary Fund (IMF) ( email )

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

Hans Weisfeld

International Monetary Fund (IMF) ( email )

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

Juan F. Yépez

International Monetary Fund (IMF) ( email )

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

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