Capital controls and capital flows: Do controls reduce the size of flows?

This paper examines the effectiveness of capital controls in limiting the size of capital outflows based on a large panel data that covers 98 countries from 1995 to 2015. Results in this paper show that imposing comprehensive capital controls that put restrictions on almost all assets categories is the necessary condition to stem outflows. In addition, comprehensive capital controls can also be imposed temporarily to reduce outflows even though a country had a fairly open capital account in the past. This provides policy rationale for using capital controls as a temporary tool to alter outflows when needed. Lastly, on targeting a particular type of asset flows, this paper finds that countries are able to reduce banking flows by closing assets channels that affect banking flows only.