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Restrictive Policy to Curb Capital Flows Volatility

Restrictive Policy to Curb Capital Flows Volatility We examine the role of the restrictive policy, through capital controls, in reducing the capital flows volatility. The study highlights the effects of these controls to dampen international financial shocks. Using quarterly data of 28 emerging economies over the period between 1999 and 2019, three empirical approaches are applied, dynamic panel data, ARDL, and local projections models. Four indexes of capital controls have contributed to the finding that a tighter level of capital controls reduces the sensitivity of capital flows to monetary and exchange rate shocks. These findings on the benefits of capital controls are particularly asymmetric according to the differences between controls on inflows and outflows, and the differences between floating and pegged exchange rate regimes. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of International Commerce, Economics and Policy World Scientific Publishing Company

Restrictive Policy to Curb Capital Flows Volatility

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Publisher
World Scientific Publishing Company
ISSN
1793-9933
eISSN
1793-9941
DOI
10.1142/S1793993321500101
Publisher site
See Article on Publisher Site

Abstract

We examine the role of the restrictive policy, through capital controls, in reducing the capital flows volatility. The study highlights the effects of these controls to dampen international financial shocks. Using quarterly data of 28 emerging economies over the period between 1999 and 2019, three empirical approaches are applied, dynamic panel data, ARDL, and local projections models. Four indexes of capital controls have contributed to the finding that a tighter level of capital controls reduces the sensitivity of capital flows to monetary and exchange rate shocks. These findings on the benefits of capital controls are particularly asymmetric according to the differences between controls on inflows and outflows, and the differences between floating and pegged exchange rate regimes.

Journal

Journal of International Commerce, Economics and PolicyWorld Scientific Publishing Company

Published: Jun 17, 2021

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