TY  - JOUR
AU  - Edwards, Sebastian
TI  - Capital Controls, Sudden Stops and Current Account Reversals
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 11170
PY  - 2005
Y2  - March 2005
DO  - 10.3386/w11170
UR  - http://www.nber.org/papers/w11170
L1  - http://www.nber.org/papers/w11170.pdf
N1  - Author contact info:
Sebastian Edwards
UCLA Anderson Graduate School of Management
110 Westwood Plaza, Suite C508
Box 951481
Los Angeles, CA 90095-1481
Tel: 310/206-6797
Fax: 310/206-5825
E-Mail: sebastian.edwards@anderson.ucla.edu
M1  - published as Sebastian Edwards. "Capital Controls, Sudden Stops, and Current Account Reversals," in Sebastian Edwards, editor, "Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences" University of Chicago Press (2007)

AB  - In this paper I use a broad multi-country data set to analyze the relationship between restrictions to capital mobility and external crises. The analysis focuses on two manifestations of external crises: (a) sudden stops of capital inflows; and (b) current account reversals. I deal with two important policy-related issues: First, does the extent of capital mobility affect countries' degree of vulnerability to external crises; and second, does the extent of capital mobility determine the depth of external crises  -- as measured by the decline in growth -- once the crises occur? Overall, my results cast some doubts on the assertion that increased capital mobility has caused heightened macroeconomic vulnerabilities. I find no systematic evidence suggesting that countries with higher capital mobility tend to have a higher incidence of crises, or tend to face a higher probability of having a crisis, than countries with lower mobility. My results do suggest, however, that once a crisis occurs, countries with higher capital mobility may face a higher cost, in terms of growth decline.
ER  -