Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/247688 
Authors: 
Year of Publication: 
2021
Series/Report no.: 
IWH Discussion Papers No. 13/2021
Publisher: 
Halle Institute for Economic Research (IWH), Halle (Saale)
Abstract: 
By focusing on the episodes of substantial capital account liberalisation and adopting a new methodology, this paper provides new evidence on the dilemma and global financial cycle theory. I first identify the capital account liberalisation episodes for 95 countries from 1970 to 2016, and then employ an augmented inverse propensity score weighted (AIPW) estimator to calculate the average treatment effect (ATE) of opening capital account on the interest rate comovements with the core country. Results show that opening capital account causes a country to lose its monetary policy independence, and a floating exchange rate regime cannot shield this effect. Moreover, the impact is stronger when liberalising outward and banking flows.
Subjects: 
average treatment effect
capital control
global financial cycle
monetary policy autonomy
propensity score matching
trilemma
JEL: 
E52
F32
F33
F42
Document Type: 
Working Paper

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