Can a liberalization of capital outflows increase net capital inflows?

摘要: Abstract Facing massive capital inflows that put downward pressure on the real exchange rate, some policymakers and analysts have recommended a liberalization of outflows. Empirically, however, removal outflow controls has apparently stimulated net inflow in several experiences, such as Britain since 1979, Italy, New Zealand Spain mid to late 1980s, Colombia, Egypt Mexico 1990s. Numerous measures liberalize outflows Chile during 1990s not had noticeable effect offseting surge inflows. How can we explain apparent paradox reducing actually increase inflows? Our theoretical model provides one explanation. A outflows, understood here reduction minimum repatriation period for foreign investment, reduces degree ‘irreversibility’ decision invest given country. This, turn, lowers option value waiting until uncertainty about possible change rules game affect investment domestic assets is resolved, because this event foreigners investing at home will be stuck with low-return asset shorter time. Thus, likely increase—not decrease—net This result an important policy implication. Liberalizing may significant benefits its own. But it appropriate defend rate presence inflows, strengthen those very