74
Views
6
CrossRef citations to date
0
Altmetric
Original Articles

An empirical analysis on government capital controls and international capital flows in Korea

Pages 919-923 | Published online: 06 Oct 2010
 

Abstract

The present paper analyses government controls of international capital flows using Korean data. First, indexes of liberalizations are constructed on controls of capital inflows and outflows based on documented policy changes made by the Korean government. Second, VAR models are estimated that include the constructed capital liberalization indexes, capital flows, and other macroeconomic variables. It is found that capital inflows increase persistently after shocks to liberalization policy while capital outflows increase temporally. It is also found that shocks to liberalization of capital outflows attract capital inflows, a result explicable by two competing theories - that liberalization of capital outflows: (1) removes investment irreversibility; and (2) signals more friendly government policy in the future. Examination of the effects of separate capital liberalization measures concerning only Korean residents and those concerning only nonresidents confirms the importance of the ‘signal effect’.

Reprints and Corporate Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

To request a reprint or corporate permissions for this article, please click on the relevant link below:

Academic Permissions

Please note: Selecting permissions does not provide access to the full text of the article, please see our help page How do I view content?

Obtain permissions instantly via Rightslink by clicking on the button below:

If you are unable to obtain permissions via Rightslink, please complete and submit this Permissions form. For more information, please visit our Permissions help page.