Domestic and Multilateral Effects of Capital Controls in Emerging Markets

NBER Working Paper No. 20822

Issued in January 2015, Revised in August 2018

NBER Program(s):International Finance and Macroeconomics



Using a novel, high frequency dataset on capital control actions in 16 emerging market economies (EMEs) from 2001 to 2012, we provide new insights into the domestic and multilateral effects of capital controls. Increases in capital account openness reduce monetary policy autonomy and increase exchange rate stability, confirming the constraints of the monetary policy trilemma. Both gross in- and outflows rise, while the effect on net capital flows is ambiguous. Tighter capital inflow restrictions generated significant spillovers, especially in the post-2008 environment of abundant global liquidity. We also find evidence of a domestic policy response to foreign capital control changes in countries that are affected by these spillovers.

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Document Object Identifier (DOI): 10.3386/w20822

Published: Gurnain Kaur Pasricha & Matteo Falagiarda & Martin Bijsterbosch & Joshua Aizenman, 2018. "Domestic and Multilateral Effects of Capital Controls in Emerging Markets," Journal of International Economics, . citation courtesy of

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