Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?

Patnaik, Ila; Shah, Ajay

doi:10.1057/imfer.2012.16

Cited by 36 publications

(15 citation statements)

References 45 publications

(62 reference statements)

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“…Both kinds of analysis show that the CCAs have no robust impact. This result is consistent with the recent literature on capital controls in India (Patnaik and Shah, 2012) and in other countries (Jinjarak et al, 2013).…”

Section: Discussionsupporting

confidence: 93%

Motivations for Capital Controls and Their Effectiveness

et al. 2015

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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. iii Terms of use: Documents in AbstractWe assess the motivations for changing capital controls and their effectiveness in India, a country with extensive and long-standing controls. We focus on the controls on foreign borrowing that can, in principle, be motivated by macroprudential concerns. We construct a fine-grained data set on capital control actions on foreign borrowing in India. Using event study methodology, we assess the factors that influence these capital control actions, the main factor being the exchange rate. Capital controls are tightened after appreciation, and eased after depreciation, of the exchange rate. Macroprudential concerns, measured by variables that capture systemic risk buildups, do not seem to be a factor shaping the use of capital controls. To assess the impact of controls, we use both event study and propensity score matching methodologies. Event study methodology suggests no impact of capital controls on most variables evaluated, but reveals limited evidence that capital controls relieve currency pressures in the short term. However, even this limited evidence disappears once selection bias is controlled for.

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Section: Discussionsupporting

confidence: 93%

Motivations for Capital Controls and Their Effectiveness

et al. 2015

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“…He finds that foreign exchange policy objectives and overheating concerns have been the two main motives for capital controls, particularly since 2000. 3 See, for example, Ostry et al (2011), Klein (2012), Hutchison et al (2012), Patnaik and Shah (2012) and Warnock (2011). 4 NKI are measured as the difference between inflows by non-residents and net outflows by residents.…”

Section: Introductionmentioning

confidence: 99%

Why do emerging markets liberalize capital outflow controls? Fiscal versus net capital flow concerns

Aizenman

Pasricha

2013

Journal of International Money and Finance

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“…India has a complex system of capital controls (Patnaik and Shah, 2012;Hutchison, Pasricha and Singh, 2012), but the restrictions on foreign portfolio investment are relatively clear. There are no quantitative restrictions or taxes on such flows, except that only qualified financial institutions can undertake equity investment.…”

Section: Datamentioning

confidence: 99%

How Do Extreme Global Shocks Affect Foreign Portfolio Investment? An Event Study for India

Yaha

Singh

Rabanal

2016

Emerging Markets Finance and Trade

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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 EconStor may AbstractForeign portfolio flows in and out of India are relevant for policymakers, and are often portrayed in the media as having a destabilizing effect on the domestic market. We use an event study approach to examine whether extreme global shocks trigger abnormal responses in foreign equity flows in and out of India, or abnormal responses in the Indian stock market. We do not find strong evidence of abnormal responses, even for the case of the global crisis of 2008.# We are grateful to the International Growth Centre for financial support. Neither institution is responsible for the views expressed here. We are also grateful to Suman Bery, Tarun Ramadorai, Subir Gokarn and seminar participants at IGC, UCSC and Stanford for comments on related work. We especially wish to acknowledge the contributions of Vimal Balasubramaniam, who did significant initial data analysis, and Ila Patnaik and Ajay Shah, who provided intellectual guidance at many points. However, the authors are solely responsible for all errors and omissions.

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Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?

Cited by 36 publications

References 45 publications

Motivations for Capital Controls and Their Effectiveness

Motivations for Capital Controls and Their Effectiveness

Why do emerging markets liberalize capital outflow controls? Fiscal versus net capital flow concerns

How Do Extreme Global Shocks Affect Foreign Portfolio Investment? An Event Study for India

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