RIEB Discussion Paper Series No.2022-29

RIEB Discussion Paper Series No.2022-29


The Effects of Capital Controls on Housing Prices∗


Policymakers increasingly use capital control policies (i.e., capital flow management) to manage capital flows. However, whether the implementation of such policies can effectively affect housing prices and to what extent is less discussed. In this paper, we study the effects of four types of granular capital control polices on housing prices using a large cross-country panel of 53 economies from 1995 to 2017. We find that the estimated effects of capital controls are distinct for different capital flow types and flow directions, but most capital control indices appear to reduce housing prices. Specifically, we find that capital controls have asymmetric effects on housing prices for advanced and emerging economies. The negative effects of capital controls on housing prices are mainly driven by pre-crisis subsample. This means that capital controls have been in effect several times before Global Financial Crisis. We also estimate the effects for boom and slump periods respectively and find that capital control policies are implemented in an acyclical way. Since there exists endogeneity for capital control on real estate transactions, we further use inverse probability weights to rebalance capital control actions and find that this method can weaken the negative effects on housing prices, and the attenuation effects can be attributed to endogenous factors.


Capital control policy; Housing price; Local projections; Inverse probability; Weighted regression adjusted estimator

JEL Classification

F21, F32, F38, F41, G28


Graduate School of Economics, Kobe University
Junior Research Fellow, RIEB, Kobe University

*This Discussion Paper won the Kanematsu Prize (FY 2021).