Why Do Countries Use Capital Controls?
37 Pages Posted: 15 Feb 2006
Date Written: December 1998
Recourse to controls on capital flows among developing economies is generally quite pervasive. This paper examines the structure and determinants of capital controls based on a cross-sectional study of developing and transition economies. It identifies categories of capital transactions that can be aggregated for analytical purposes. Controls are found to be related to the balance of payments, macroeconomic management, market and institutional evolution, prudential and other factors. The relationship with the balance of payments, however, is not robust to simultaneous equation analysis.
Keywords: capital controls, development
JEL Classification: F21, F32, O16
Suggested Citation: Suggested Citation