Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5100859 | Journal of International Economics | 2017 | 65 Pages |
Abstract
The recent global financial crisis has resuscitated the debate on the relevance of capital controls as effective policy instruments. This paper contributes to this debate by studying the shock-absorbing capacity of capital controls. Using a recently developed capital control dataset for a panel of 33 emerging market economies, I show that output in economies with stricter capital inflow controls responds significantly less to global credit supply shocks, whereas capital outflow controls have no significant shock-absorbing capacity. Leverage is significantly lower in economies enacting stricter capital inflow controls, suggesting that financial frictions play a role in driving the shock-absorbing capacity of inflow controls.
Related Topics
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Authors
Nadav Ben Zeev,