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International Finance Discussion Papers
The International Finance Discussion Papers logo links to the International Finance Discussion Papers home page A Simple Measure of the Intensity of Capital Controls
Hali J. Edison; Francis E. Warnock
2001-708  (August 2001, latest version October 2002)

Abstract:  We propose a monthly measure of the intensity of capital controls across 29 emerging markets. Our measure, which is based on restrictions on foreign ownership of equities, provides information on the extent and evolution of financial liberalization. Using the measure, we show that a complete liberalization results in a much sharper decrease in the cost of capital than previously reported, but following a partial liberalization the cost of capital increases. Moreover, the more complete the liberalization is, the greater are the subsequent exchange rate appreciation and capital inflows.

Full paper, latest version (232 KB PDF)
Original version (117 KB PDF)

Keywords
emerging markets, international financial liberalization, openness, portfolio investment

Related Material
Spreadsheet containing Edison-Warnock capital controls measure for 29 countries, Dec. 1988 - Dec. 2000
Edison Warnock Restrictions Measure (75 KB ZIP)

As Published Elsewhere
forthcoming, Journal of Empirical Finance

PDF files: Adobe Acrobat Reader   ZIP files: PKWARE

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