When China joined the World Trade Organization in December 2001, it marked a watershed for the world economy. Ten years from now, the opening of China’s capital account and the financial integration that will unfold will be viewed as a milestone of similar importance.
Staff discussion papers
Staff working papers
This paper attempts to borrow the tradition of estimating policy reaction functions in monetary policy literature and apply it to capital controls policy literature. Using a novel weekly dataset on capital controls policy actions in 21 emerging economies over the period 1 January 2001 to 31 December 2015, I examine the mercantilist and macroprudential motivations for capital control policies.
The Global Financial Cycle, Monetary Policies and Macroprudential Regulations in Small, Open EconomiesThis paper analyzes the implications of the global financial cycle for conventional and unconventional monetary policies and macroprudential policy in small, open economies such as Canada. The paper starts by summarizing recent work on financial cycles and their growing correlation across borders.
Using a novel data set on capital control actions in 17 emerging-market economies (EMEs) over the period 2001–11, we provide new evidence on domestic and multilateral (or spillover) effects of capital controls.
We assess the motivations for changing capital controls and their effectiveness in India, a country with extensive and long-standing controls. We focus on the controls on foreign borrowing that can, in principle, be motivated by macroprudential concerns.
Why Do Emerging Markets Liberalize Capital Outflow Controls? Fiscal versus Net Capital Flow ConcernsIn this paper, we provide empirical evidence on the factors that motivated emerging economies to change their capital outflow controls in recent decades. Liberalization of capital outflow controls can allow emerging-market economies (EMEs) to reduce net capital inflow (NKI) pressures, but may cost their governments the fiscal revenues that external financial repression generates.
This paper examines the effectiveness of international capital controls in India over time by analyzing daily return differentials in the non-deliverable forward (NDF) markets using the self-exciting threshold autoregressive (SETAR) methodology.
In this paper, we explore the link between stress in the domestic financial sector and the capital flight faced by countries in the 2008-9 global crisis. Both the timing of emergence of internal financial stress in developing economies, and the size of the peak-trough declines in the stock price indices was comparable to that in high income countries, indicating that there was no decoupling, even before Lehman Brothers’ demise.
This paper finds a strong empirical link between domestic banking sector competitiveness and de facto international integration. De-facto international integration is measured through a new index of financial integration, which measures, for deviations from covered interest parity, the size of no-arbitrage bands and the speed of arbitrage outside the no-arbitrage band.
Bank of Canada Review articles
November 14, 2013 This article focuses on a quantitative method to identify financial system vulnerabilities, specifically, an imbalance indicator model (IIM) and its application to Canada. An IIM identifies potential vulnerabilities in a financial system by comparing current economic and financial data with data from periods leading up to past episodes of financial stress. It complements other sources of information - including market intelligence and regular monitoring of the economy - that policy-makers use to assess vulnerabilities.