RIEB Discussion Paper Series No.2024-30

Title

Effects of Capital Flow Management Measures on Wealth Inequality: New Evidence from Counterfactual Estimators

Abstract

We provide cross-country evidence that variations in capital flow management measures (CFMs) result in differences in wealth inequality and distribution by using counterfactual estimators for causal inference. The imposition of aggregate CFMs increases wealth inequality in advanced economies, and the imposition of aggregate CFMs on outflows increases wealth inequality in emerging economies significantly. Diverging from previous studies, we analyze the impacts of ten distinct asset-specific CFMs. In particular, the imposition of the related CFMs to money market and derivatives reduces wealth inequality significantly. The decrease in wealth inequality is due to a decrease in the wealth shares of the top 1% and 10% groups along with an increase in the wealth shares of the middle 40% and bottom 50%. Overall, the effects of CFMs on wealth inequality and distribution are quite heterogeneous; they depend on income levels, capital flow directions, and asset categories.

Keywords

Capital flow management measures (CFMs); Wealth inequality; Gini coefficient; Wealth distribution; Counterfactual estimator

JEL Classification

D63, E21, F38, G15, G28, O16

Inquiries

Yang ZHOU
Institute of Developing Economies, JETRO
and
Research Institute for Economics and Business Administration, 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