Capital Flow Management Policies in Emerging Market Economies : Are They Successful in Mitigating Drastic Changes of Capital Flows?

This paper analyzes the effect of capital flow management policies (CFMs) on extreme capital flow movements in 16 emerging market economies from 1999 to 2008. We show that both capital controls and macroprudential measures are effective in mitigating drastic changes of capital flows, but macroprudential measures are effective in more limited circumstances. We also find that CFMs do not have significant impacts on capital flow volumes. The results suggest that CFMs, especially capital controls, could be employed as policy toolkits for mitigating extreme capital flow movements without distorting capital flows in a normal period