OECD Journal: Financial Market Trends

Frequency
Annual
ISSN: 
1995-2872 (online)
ISSN: 
1995-2864 (print)
http://dx.doi.org/10.1787/19952872
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The articles in Financial Market Trends focus on trends, structural issues and developments in financial markets and the financial sector.

Article
 

Capital controls on inflows, the global financial crisis and economic growth

Evidence for emerging economies You do not have access to this content

English
 
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    http://oecd.metastore.ingenta.com/content/2713021ec002.pdf
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Author(s):
Adrian Blundell-Wignall, Caroline Roulet
20 Mar 2014
Pages:
14
Bibliographic information
No.:
6,
Volume:
2013,
Issue:
2
Pages:
29–42
http://dx.doi.org/10.1787/fmt-2013-5jzb2rhkgthc

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The results of an IMF study on controls on capital inflows in emerging economies, using a probit regression approach, are first replicated and tested for stability. The IMF results, downplayed by the authors, have been used by others to suggest controls can be helpful in a crisis situation. However, the stability findings suggest the results are not sufficiently robust to make strong claims in this regard. The same 37 countries and the IMF capital control measures are then used in a panel regression study to examine the impact of capital inflows on annual real GDP growth around the Global Financial Crisis. The results between the pre-crisis and the crisis periods are inconsistent with the IMF study – finding that capital restrictions on inflows (particularly debt liabilities) are most useful in good times when inflows to emerging markets are strong and upward pressure on managed exchange rates and reserves accumulation is greatest. However, lower controls on bonds and on FDI inflows seem to be associated with better growth outcomes during the crisis period studied. These findings are more consistent with studies that see capital controls as part of exchange rate targeting policies and concerns about excess reserves accumulation.
JEL Classification: C23, C25, F21, F43, G01
Keywords: Capital controls, economic growth, emerging economies, financial crisis

 
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