Capital Controls and Foreign Direct Investment

25 Pages Posted: 14 Jul 2003

See all articles by Elizabeth Asiedu

Elizabeth Asiedu

University of Kansas - Department of Economics

Donald D. Lien

University of Texas at San Antonio - College of Business - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: May 2003

Abstract

This paper examines the effect of three types of capital control policies on FDI: (i) the existence of multiple exchange rates; (ii) restrictions on capital account, and (iii) restrictions on the repatriation of export proceeds. We find that the impact of capital controls on FDI varies by region and has changed over time. In the 1970s and 1980s, none of the policies had a significant impact on FDI. In the 1990s, all three were significant. Furthermore, capital controls has no effect on FDI to Sub-Saharan Africa and the Middle East, but affects FDI to East Asia and Latin America adversely.

Keywords: Capital controls, capital flows, developing countries, foreign direct investment, liberalization

JEL Classification: F23, O24

Suggested Citation

Asiedu, Elizabeth and Lien, Donald, Capital Controls and Foreign Direct Investment (May 2003). Available at SSRN: https://ssrn.com/abstract=416722 or http://dx.doi.org/10.2139/ssrn.416722

Elizabeth Asiedu (Contact Author)

University of Kansas - Department of Economics ( email )

1300 Sunnyside Drive
Lawrence, KS 66045-7585
United States
785-864-3501 (Phone)
785-864-5270 (Fax)

Donald Lien

University of Texas at San Antonio - College of Business - Department of Economics ( email )

6900 North Loop 1604 West
San Antonio, TX 78249
United States
210-458-4313 (Phone)
210-458-4308 (Fax)

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