RIEB Discussion Paper Series No.2022-38

Title

Effectiveness of Capital Controls: Gates versus Walls

Abstract

This study analyzes the effectiveness of capital controls on international debt flows using data of 81 economies, including both advanced and emerging economies, over the period from 1995 to 2019. The analysis using the total sample shows that the impulse responses of capital controls are in the expected directions, although they are barely statistically significant. Making various distinctions among samples (such as advanced and emerging economies and pre- and post-crisis periods), we find that the effectiveness of capital controls in most cases is less plausible compared to the total sample case. However, the distinction between the "gate" and "wall" economies indicates that the effectiveness of capital controls is most relevant for the "wall" emerging economies.

Keywords

Capital flows; Capital controls; Local projection

JEL Classification

E69, F32, F38, F41

Inquiries

Yang ZHOU
Graduate School of Economics, Nagoya City University
Junior Research Fellow, RIEB, Kobe University

Shigeto KITANO
Research Institute for Economics and Business Administration
Kobe University
Rokkodai-cho, Nada-ku, Kobe
657-8501 Japan
Phone: +81-78-803-7036
FAX: +81-78-803-7059