Reinhart, Carmen and Magud, Nicolas (2007): Capital controls: An evaluation. Published in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences (2007): pp. 645-674.
Download (124Kb) | Preview
The literature on capital controls has (at least) four very serious apples-to-oranges problems: (i) There is not unified theoretical framework to analyze the macroeconomic consequences of controls; (ii) there is significant heterogeneity across countries and time in the control measures implemented; (iii) there are multiple definitions of what constitutes a “success” and (iv) the empirical studies lack a common methodology – furthermore these are significantly “overweighted” by a couple of country cases (Chile and Malaysia). In this paper, we attempt to address some of these shortcomings by: being very explicit about what measures are construed as capital controls. Also, given that success is measured so differently across studies, we sought to “standardize” the results of over 30 empirical studies we summarize in this paper. The standardization was done by constructing two indices of capital controls: Capital Controls Effectiveness Index (CCE Index), and Weighted Capital Control Effectiveness Index (WCCE Index). The difference between them lies only in that the WCCE controls for the differentiated degree of methodological rigor applied to draw conclusions in each of the considered papers. Inasmuch as possible, we bring to bear the experiences of less well known episodes than those of Chile and Malaysia.
|Item Type:||MPRA Paper|
|Original Title:||Capital controls: An evaluation|
|Keywords:||capital controls monetary policy financial crises contagion hot money|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F42 - International Policy Coordination and Transmission
F - International Economics > F3 - International Finance > F30 - General
E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy
F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics
|Depositing User:||Carmen Reinhart|
|Date Deposited:||16. Mar 2009 14:28|
|Last Modified:||17. Feb 2013 21:15|
Ariyoshi, Akira, Karl Habermeier, Bernard Laurens, Inci Okter-Robe, Jorge Canales-Kriljenko, and Anderi Kirilenko, “Capital Controls: Country Experiences with Their Use and Liberalization”, International Monetary Fund Occasional Paper 190, 2000.
Guillermo A. Calvo, Leonardo Leiderman, and Carmen M. Reinhart, “The Capital Inflows Problem: Concepts and Issues,” Contemporary Economic Policy, Vol. XII No. 3, July 1994, 54-66.
Guillermo A. Calvo and and Carmen M. Reinhart, “Fear of Floating,” Quarterly Journal of Economics, Vol. CXVII No. 2, May 2002, 379-408.
Chanda, Areendam, “The Influence of Capital Controls on Long Run Growth: Where and How Much?” Mimeograph, North Carolina State University, September 2003.
De Gregorio, José, Sebastian Edwards, and Rodrigo Valdés, “Controls on Capital Inflows: Do They Work?” Journal of Development Economics, Vol. 3 No. 1, 2000, 59-83.
Desai, Mihir, Fritz Foley, and James Hanes, “Capital Controls, Liberalizations, and Foreign Direct Investment”, National Bureau of Economic Research Working Paper 10337, March 2004.
Dornbusch, Rudi, “Malaysia: Was It Different?” National Bureau of Economic Research Working Paper 8325, June 2001.
Edwards, Sebastian, “How Effective Are Controls on Capital Inflows? An Evaluation of Chile’s Experience,” Mimeograph, UCLA, June 1999.
Edwards, Sebastian, “How Effective are Capital Controls?” Journal of Economic Perspectives Vol. 13 No.4, Fall 1999, 65-84.
Edwards, Sebastian and Roberto Rigobon, “Capital Controls, Managed Exchange Rates, and External Vulnerability,” Mimeograph, UCLA, February 2004.
Forbes, Kristen, “One Cost of the Chilean Capital Controls: Increased Financial Constraints for Smaller Trade Firms”, National Bureau of Economic Research Working Paper 9777, June 2003.
Edison, Hali and Carmen Reinhart, “Stopping Hot Money: On the Use of Capital Controls during Financial Crises”, Journal of Development Economics, Vol. 66 No. 2 December 2001, 533-553.
Edison, Hali, Michael Klein, Licca Ricci, and Torsten Slok, “Capital Account Liberalization and Economic Performance: Survey and Synthesis”, International Monetary Fund Working Paper 02/120, July 2002
Johnson, Simon, and Todd Mitton, “ Cronyism and Capital Controls: The Case of Malaysia,” Journal of Financial Economics, 2003.
Johnston, Barry. and Natalia Tamirisia, “Why do Countries Use Capital Controls?”, International Monetary Fund Working Paper 98/181, December 1998.
DeKaplan, Ethan and Dani Rodrik, “Did the Malaysian Capital Controls Work?” in S. Edwards and J. Frankel, eds., Preventing Currency Crises in Emerging Markets, (Chicago: University of Chicago Press for the NBER, 2002).
Labán, Raul M., and Felipe Larraín, “What determines Capital Inflows? An Empirical Analysis for Chile,” Faculty Research Working Paper Series R97-09, JFK School of Government, Harvard University, April 1997.
Labán, Raul M., and Felipe Larraín, “The Return of Private Capital to Chile in the 1990s: Causes, Effects, and Policy Reactions,” Faculty Research Working Paper Series R98-02, JFK School of Government, Harvard University, January 1998.
Le Fort, Guillermo and Carlos Budnevich, “Capital Account Regulations and Macroeconomic Policy: Two Latin Experiences,” Mimeograph, Banco Central de Chile, March 1996.
Miniane, Jacques and John Rogers, “Capital Controls and the International Transmission of U.S. Money Shocks,” Board of Governors of the Federal Reserve, mimeograph, June 2004.
Montiel, Peter and Carmen M. Reinhart (1999), “Do Capital Controls and Macroeconomic Policies Influence the Volume and Composition of Capital Flows? Evidence from the 1990’s,” Journal of International Money and Finance, Vol. 18 No. 4, August,619-635.
NitithanPrapas, Isriya, Sunil Rongala, and Thomas D. Willett, “The Role of Capital Controls and Currency Regimes in the Asian Crisis, Mimeograph School of Politics and Economics Claremint Graduate University, August 2002.
Reinhart, Carmen and Vincent R. Reinhart “Some Lessons for Policy Makers Who Deal with the Mixed Blessing of Capital Inflows,” in Miles Kahler, ed. Capital Flows and Financial Crises, Council on Foreign Relations Book (Ithaca, NY: Cornell University Press, 1998), 93-127.
Reinhart, Carmen and Todd Smith (1998), “Too Much of a Good Thing: The Macroeconomic Effects of Taxing Capital Inflows,” in Reuven Glick, ed. Managing Capital Flows and Exchange Rates: Perspectives from the Pacific Basin, (Cambridge: Cambridge University Press), 436-464.
Reinhart, Carmen and Todd Smith, “Temporary Controls on Capital Inflows”, Journal of International Economics, Vol. 57 No. 2, December 2002, 327-351.
Tamirisia, Natalia, “Do Macroeconomic Effects of Capital Controls Vary by Their Type? Evidence from Malaysia”, International Monetary Fund Working Paper 04/3, January 2004.