By Jean-Charles Bricongne, Rémy Lecat
Despite the large capital outflows during the Covid-19 crisis, emerging economies did not make extensive use of capital controls. Indeed, these have had limited effects on capital outflows, being more effective on inflows. This column shows that macroprudential measures on the financial sector, which are increasingly part of the policy mix, have a positive impact on outflows when applied in the origin country and a negative impact on inflows when applied in the destination country. Cooperation between origin and destination countries, both on capital controls and macroprudential measures, has more than additive effects.
Link: The role of capital controls and macroprudential measures in taming capital flows