Template-Type: ReDIF-Paper 1.0
Author-Name: Jon Frost
Author-X-Name-First: Jon
Author-X-Name-Last: Frost
Author-Name: Hiro Ito
Author-X-Name-First: Hiro
Author-X-Name-Last: Ito
Author-Name: René van Stralen
Author-X-Name-First: René
Author-X-Name-Last: van Stralen
Title: The effectiveness of macroprudential policies and capital controls against volatile capital inflows
Abstract: This paper compares the effectiveness of macroprudential policies (MaPs) and capital controls (CCs) in influencing the volume and composition of capital inflows, and the probability of banking and currency crises. We distinguish between foreign exchange (FX)-based MaPs, which may be similar to some types of CCs, and non-FX-based MaPs. Using a panel of 83 countries over the period 2000-17, and a propensity score matching model to control for selection bias, we find that capital inflow volumes are lower where FX-based MaPs have been activated. The imposition of CCs does not have a significant effect on the volume or composition of capital inflows. Further, we find that the activation of MaPs is associated with a lower probability of banking crises and surges in capital inflows in the following three years.
Length: 32 pages
Creation-Date: 2020-05
File-URL: https://www.bis.org/publ/work867.pdf
File-Format: Application/pdf
File-Function: Full PDF document
File-URL: https://www.bis.org/publ/work867.htm
File-Format: text/html
Number: 867
Classification-JEL: F38, G01, G28
Keywords: capital account openness, capital flows, capital controls, macroprudential policy, banking crises, currency crises
Handle: RePEc:bis:biswps:867