Capital controls and exchange rate instability in developing economies

Glick, Reuven; Hutchison, Michael M.

doi:10.1016/j.jimonfin.2004.11.004

Cited by 113 publications

(93 citation statements)

References 33 publications

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“…An increase in government consumption is linked to the use of controls, which is most likely due to the government's need to levy taxes. 19 This result was consistent with those reported by Brune et al (2001), Glick and Hutchison (2005), Grilli and Milesi-Ferretti (1995) and Milesi-Ferretti (1998).…”

Section: Resultssupporting

confidence: 88%

“…This result suggests that decontrol occurs when the government is divided, and may not be able to withstand external pressure. This may also be related to the finding reported by Glick and Hutchison (2005), Grilli and Milesi-Ferretti (1995) and MilesiFerretti (1998) that an increase in the number of government changes was inversely related to the presence of capital controls.…”

Section: Resultsmentioning

confidence: 57%

“…The IMF changed its methodology after 1996 to provide a more detailed measure of the rules and restrictions governing the capital account. Glick and Hutchison (2005) extended the original AREAR series through 1998, using the descriptions of country practices provided in the IMF's annual reports, and we incorporate their data into ours. 16 As already noted, this is by far the most frequently used measure for capital controls.…”

Section: Restrictions (Arear)mentioning

confidence: 99%

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The Imf and the Liberalization of Capital Flows

Joyce

2005

SSRN Journal

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Section: Resultssupporting

confidence: 88%

Section: Resultsmentioning

confidence: 57%

Section: Restrictions (Arear)mentioning

confidence: 99%

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The Imf and the Liberalization of Capital Flows

Joyce

2005

SSRN Journal

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“…Most studies in this area have focused on the effect of capital controls on exchange rate stability and currency crises (e.g., Glick and Hutchison, 2005;and Glick, Guo and Hutchison, 2006), financial stability and policy autonomy (e.g., Edison and Reinhart, 2001) and domestic investment (e.g. Mody and Murshid, 2005).3 The exceptions are Ariyoshi et al (2000), Montiel and Reinhart (1999), Lane and Milesi-Ferretti (2003) and to some extent, IMF (2008).…”

Section: Multi-country Studiesmentioning

confidence: 99%

Controlling capital? Legal restrictions and the asset composition of international financial flows

Binici

Hutchison

Schindler³

2010

Journal of International Money and Finance

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145

101

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractLegal restrictions on international capital movements are imposed in many countries in an attempt to (partially) insulate their economies from abroad and pursue some degree of domestic policy independence. But is the imposition of capital controls effective in achieving these goals? We investigate this issue from a new angle by linking de jure restrictions on three specific asset categories of outflows and inflows with the corresponding component of capital flows. The analysis is based on a novel panel data set of capital controls data, disaggregated by asset class and by inflows/outflows, and covering 74 countries during 1995-2005. Using panel LSDV regressions, and including a host of well-known determinants of capital flows, we estimate a model of capital flows with four categories: equity-like flows (including FDI) and debt for both capital inflows and capital outflows. The estimated effects of capital controls vary markedly with the type of controls imposed: they are binding on capital outflows (debt, equity and FDI); have no apparent effect on capital inflows of various types; and are less effective in low and middle-income countries. Moreover, there are no apparent substitution effects so that controls on debt and equity outflows change the volume and composition of capital flows as well as the net flow of capital in each asset class. The large differences across asset categories in the effects of capital controls suggest that the common use of aggregate capital control indicators can be misleading.JEL Classification: F21; F32; F36

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“…Several studies indicate that developing and emerging market countries are different from industrialized/developed countries with respect to the factors that make them susceptible to a financial crisis (Broner and Rigobon, 2006;Glick and Hutchison, 2005;Caballero and Krishnamurthy, 2002;and Tornell and Westermann 2002). Specifically, these countries tend to be especially open to international capital inflows that are short-term in nature and usually denominated in foreign-currency ("original sin") in the terminology of Eichengreen and Hausman, 2005).…”

Section: Data Descriptionmentioning

confidence: 99%

Fiscal and monetary policies and the cost of sudden stops

Hutchison¹,

Noy²,

Wang³

2010

Journal of International Money and Finance

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This article investigates the effects of macroeconomic policy (monetary and fiscal) on output growth during financial crises characterized by a "sudden stop" in net capital inflows in developing and emerging market economies. We investigate 83 sudden stop crises in 77 countries over 1982-2003 using a baseline empirical model to control for the various determinants of output losses during sudden stop crises. Extending the baseline model to account for policies--contractionary as well as expansionary--we measure the marginal effects of policy on output losses. Simple descriptive statistics indicate no apparent correlation between the costs of financial crises and the economic policies pursed at the time. Once controlling for various pre-conditions and other factors, however, we find that monetary and fiscal tightening at the time of a sudden stop crisis significantly worsens output losses. JEL: E52, E62, F32, F43, O16

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Capital controls and exchange rate instability in developing economies

Cited by 113 publications

References 33 publications

The Imf and the Liberalization of Capital Flows

The Imf and the Liberalization of Capital Flows

Controlling capital? Legal restrictions and the asset composition of international financial flows

Fiscal and monetary policies and the cost of sudden stops

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