Open AccessThe domestic impacts and spillovers of capital controls
Author(s) -
Chokri Zehri
Publication year - 2020
Publication title -
economic annals/ekonomski anali
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.148
H-Index - 12
eISSN - 1820-7375
pISSN - 0013-3264
DOI - 10.2298/eka2027031z
Subject(s) - economics , capital (architecture) , capital control , capital account , variance decomposition of forecast errors , monetary economics , exchange rate , capital consumption allowance , international economics , monetary policy , capital formation , capital flows , financial capital , human capital , econometrics , market economy , geography , liberalization , archaeology
The effectiveness of capital controls has still not been established, and if they are indefinite they create distortions. This study uses quarterly data on capital controls in 25 Asian and Latin American countries from 2000 to 2019. We present further evidence on the internal and multilateral impacts of capital controls using a Panel VAR model with variance decomposition and impulse-response function analysis. The results show that domestically, capital controls, became more effective after the global financial crisis, with more monetary policy autonomy and exchange rate policy stability. Contrarily, these controls do not affect international reserve accumulation, and a combination of policies, capital controls, and reserves is required to assist governments? decisions. Internationally, capital controls cause negative spillovers that require policy coordination between the countries setting controls and those consequently receiving massive inflows.