Working Paper: NBER ID: w12589
Authors: Hali J. Edison; Francis E. Warnock
Abstract: We investigate the impact of two types of financial liberalizations on short- and long-horizon capital flows to emerging markets in a framework that controls for push and pull factors. The first type of liberalization, a reduction in capital controls, is countrywide but uncertain, because its extent and permanence is not known with certainty. The second type, a cross-border listing, is a firm-level liberalization that has no uncertainty. Consistent with theoretical predictions, we find that the deterministic cross-listing results in an immediate but short-lived increase in capital inflows. In contrast, the uncertain reduction in capital controls results in increased inflows only over a longer horizon, if at all.
Keywords: Cross-Border Listings; Capital Controls; Equity Flows; Emerging Markets
JEL Codes: F21; F3; G15
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| cross-border listings (G15) | immediate increase in capital inflows (F32) |
| reductions in capital controls (F32) | increased inflows over a longer horizon (F21) |
| reductions in capital controls (F32) | outflows in Latin America (O54) |
| cross-border listings (G15) | short-lived increases in capital inflows (F32) |
| reductions in capital controls (F32) | pronounced impacts in the long term (F69) |