Capital controls, capital flow contractions, and macroeconomic vulnerability
By: Sebastian Edwards.
Contributors: Edwards, Sebastian.; National Bureau of Economic Research.
Series: NBER working paper series -- working paper 12852; Working paper series (National Bureau of Economic Research : Online) -- working paper no. 12852.
Publisher: National Bureau of Economic Research
Published: 2007
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Description: "In this paper I analyze whether restrictions to capital mobility reduce vulnerability to external shocks.  More specifically, I ask if countries that restrict the free flow of international capital have a lower probability of experiencing a large contraction in net capital flows.  I use three new indexes on the degree of international financial integration and a large multi-country data set for 1970-2004 to estimate a series of random-effect probit equations.  I find that the marginal effect of higher capital mobility on the probability of a capital flow contraction is positive and statistically significant, but very small.  Having a flexible exchange rate greatly reduces the probability of experiencing a capital flow contraction.  The benefits of flexible rates increase as the degree of capital mobility increases.  A higher current account deficit increases the probability of a capital flow contraction, while a higher ratio of FDI to GDP reduces that probability"--National Bureau of Economic Research web site.
Notes: Title from PDF file as viewed on 3/23/2007.

Includes bibliographical references.

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