Capital controls and banking crises in emerging economies: an empirical investigation

Previous studies of the relation between capital controls and banking crises have found mixed results. We suggest that this is at least in part because at the time data was not available to distinguish between controls on inflows and outflows. We find that controls on outflows are related to more banking crises while there is no statistically significant relationship with controls on inflows. This is consistent with the view that such inflow controls need to be used carefully and that in such cases they may be useful and in others they may be harmful.