How Do Capital Controls Affect International Trade? – Economics Letters – article

How Do Capital Controls Affect International Trade?

Dahai Fu, Li Cao | Economics Letters

2019-10-22

Trade effects of capital controls have not been thoroughly examined empirically. Using a new dataset of capital controls on both inflows and outflows, we study the impact of capital controls on international trade by augmenting the gravity model with capital controls. The results consistently show that capital controls are correlated more with exports rather than imports. Inward capital controls reduce exports, while outward capital controls promote exports.

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