Author(s): Bogdan Bogdanov, European Commission
Whether free movement of international capital induces greater risk of foreign exchange rate and balance-of-payments volatility, or not, is an important question in international finance and economic policy making. The paper employs propensity score matching methodologies to estimate the impact of maintaining open capital accounts on the volatility of international capital flows and foreign exchange rates using data for 69 countries, in the sample period 1980-2011. The findings of the study suggest that maintaining an open capital account could contribute to lower foreign exchange rate volatility. It also finds that capital flow management measures may not have an effect on the volatility of short- and long-term capital flows.
|KC-AI-14-521-EN-N (online)||KC-AI-14-521-EN-C (print)|
|ISBN 978-92-79-35170-9 (online)||ISBN 978-92-79-36115-9 (print)|
|doi: 10.2765/7023 (online)||doi: 10.2765/77799 (print)|
Economic Papers are written by the staff of the Directorate-General for Economic and Financial Affairs, or by experts working in association with them. The Papers are intended to increase awareness of the technical work being done by staff and to seek comments and suggestions for further analysis. The views expressed are the author’s alone and do not necessarily correspond to those of the European Commission.