Title: Capital controls, capital flow contractions, and macroeconomic vulnerability
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.