Are capital controls useful to mitigate global financial shocks?
DOI:
https://doi.org/10.59339/de.v62i238.534Keywords:
Monetary Policy Shocks, Capital Controls, Capital Flows, Panel DataAbstract
This paper studies if capital controls ameliorate the impact of financial shocks for capital inflows (defined as net selling of domestic assets to non-residents) and outflows (defined as net buying of domestic assets to residents). It estimates dynamic panel data models with quarterly data for 17 emerging economies for the 2001-2015 period and analyzes the interaction effect of capital control indices and shocks to the United States monetary policy on international capital mobility. The main findings show that the interaction variables are statistically significant in ameliorating speculative capital inflows. However, capital controls are not statistically significant for capital outflows. These asymmetric results indicate that capital controls are relevant for non-residents portfolio decisions, but they are not for residents’ decisions (accumulation of external assets by residents).
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