Short- and Long-Run Integration: Do Capital Controls Matter?
Brookings Trade Forum, 2001
Posted: 11 Sep 2001
This paper studies whether capital controls affect the link between domestic and foreign stock market prices and interest rates. To examine the characteristics of international market integration and the effects of capital controls in the short- and long-run, we use band-pass filter techniques. We find that markets seem to be more linked at longer horizons. We also find little evidence that controls effectively segment domestic markets from foreign markets. When they do, the effects seem to be short lived. Moreover, the effects of controls on outflows do not seem to differ from those of controls on inflows.
Keywords: Capital controls, restrictions on capital movement, financial integration, band-pass filter
JEL Classification: F02, F21, F32, F36, G15
Suggested Citation: Suggested Citation