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Article dans une revue Journal of International Money and Finance Année : 2023

Capital controls and foreign reserves against external shocks: Combined or alone?

Résumé

Long considered suboptimal, capital controls and FX interventions are now recognized as prudential measures. Yet, whether they are used in combination remains an open question. Thanks to a rich dataset from 1950, we investigate how the response of FX reserves to an exogenous US monetary shock depends on capital controls. The response is insignificant with a very close capital account. By contrast, for a significant number of countries, FX reserves and capital controls are combined to tame the effects of an international financial shock. Yet, as countries open up financially, FX reserves replace capital controls. There is no one-sizes-fits-all recipe.
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Dates et versions

halshs-04409575, version 1 (22-01-2024)

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Rafael Cezar, Eric Monnet. Capital controls and foreign reserves against external shocks: Combined or alone?. Journal of International Money and Finance, 2023, 137, pp.102906. ⟨10.1016/j.jimonfin.2023.102906⟩. ⟨halshs-04409575⟩
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