Global Capital Controls in the Twenty-First Century : A Hierarchical Measure of Capital Controls

In this study, we construct a set of monthly de jure indexes that measure the on-going changes in capital controls in 190 countries from 1999 to 2019. The information about policy changes on capital accounts is extracted from the International Monetary Fund’s Annual Report on Exchange Arrangement and Exchange Restrictions, and a series of hierarchical weights are employed to capture the intensities of these policy changes. The indexes show that capital controls were relaxed globally in the first two decades of the twenty-first century, and more relaxations were on capital outflows. The progress of capital account liberalization was highly different across countries in different periods. We further apply these indexes to identify policy central countries and policy interdependence among sample countries, and test the effects of capital controls on cross-border capital flows, economic growth, and financial vulnerability