This paper examines whether cross-border capital flows can be regulated by imposing capital account restrictions (CARs) in both source and recipient countries, as was originally advocated by John Maynard Keynes and Harry Dexter White. To this end, we use data on bilateral cross-border bank flows from 31 source to 76 recipient (advanced and emerging market) countries over 1995-2012, and combine this information with a new and comprehensive dataset on various outflow and inflow related capital controls and prudential measures in these countries. Our findings suggest that CARs at either end can significantly influence the volume of cross-border bank flows, with restrictions at both ends associated with a larger reduction in flows. We also find evidence of cross-border spillovers whereby inflow restrictions imposed by countries are associated with larger flows to other countries. These findings suggest a useful scope for policy coordination between source and recipient countries, as well as among recipient countries, to better manage potentially disruptive flows.

This paper investigates why controls on capital inflows have a bad name, and evoke such visceral opposition, by tracing how capital controls have been used and perceived, since the late nineteenth century. While advanced countries often employed capital controls to tame speculative inflows during the last century, we conjecture that several factors undermined their subsequent use as prudential tools. First, it appears that inflow controls became inextricably linked with outflow controls. The latter have typically been more pervasive, more stringent, and more linked to autocratic regimes, failed macroeconomic policies, and financial crisis-inflow controls are thus damned by this "guilt by association." Second, capital account restrictions often tend to be associated with current account restrictions. As countries aspired to achieve greater trade integration, capital controls came to be viewed as incompatible with free trade. Third, as policy activism of the 1970s gave way to the free market ideology of the 1980s and 1990s, the use of capital controls, even on inflows and for prudential purposes, fell into disrepute.

This paper examines the structural competitiveness of oil-rich economies in sub-Saharan Africa relative to other major oil-exporting developing countries, and investigates the reasons for systematic differences in the non-oil export performance across these economies. The analysis reveals that oil-rich Africa lags behind other oil-exporters in terms of diversification, global market share and the overall investment climate. The poor performance of their nonoil sector can be largely attributed to weak infrastructure and institutional quality. The results also show that institutional quality is a significant determinant of the extent to which oil abundance affects the competitiveness of the non-oil sector; thereby explaining the divergent experiences of oil-rich economies across the world. This implies that oil wealth does not necessarily weaken the non-oil tradable sector; countries may mitigate the impact of Dutch disease and benefit from oil booms if revenues are used prudently to reduce oil dependence.

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate. This paper examines the spatial dispersion effects of regional conflicts, defined as internal or external armed conflicts in contiguous states, on international trade. Our empirical findingsbased on different measures of conflict constructed using alternate definitions of contiguity and conflict-reveal a significant collateral damage in terms of foregone trade as a result of spillovers from conflict in neighboring countries. The magnitude of this negative externality is somewhat larger for international conflicts than intrastate warfare, but about one-third of conflict in the host economies. Further, the impact is persistent-on average, it takes bilateral trade three years to recover from the end of intrastate conflicts in neighboring states, and five years from international conflicts. These findings are robust to alternate definitions of conflict, estimation methods, and specifications, and underscore the importance of taking into account spillover effects when estimating the economic costs of warfare.