Capital Controls and Recovery from the Financial Crisis of the 1930s

Working Paper No. 20220 We examine the first widespread use of capital controls in response to a global or regional financial crisis. In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their causal effects on macroeconomic recovery from the Great Depr...

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Bibliographic Details
Published in:NBER Working Paper Series 2014-06, p.20220
Main Authors: Mitchener, Kris James, Wandschneider, Kirsten
Format: Article
Language:English
Subjects:
Banking
Capital movement
Central banks
Currencies
Currency
Economic crisis
Economic recovery
Economic theory
Exports
Fixed exchange rates
Foreign exchange rates
Gold
Great Depression
Industrial production
International
Macroeconomics
Monetary policy
Time series
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Summary:Working Paper No. 20220 We examine the first widespread use of capital controls in response to a global or regional financial crisis. In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their causal effects on macroeconomic recovery from the Great Depression. We find evidence that they stemmed gold outflows in the year following their imposition; however, time-shifted, difference-in- differences (DD) estimates of industrial production, prices, and exports suggest that exchange controls did not accelerate macroeconomic recovery relative to countries that went off gold and floated. Countries imposing capital controls also appear to perform similar to the gold bloc countries once the latter group of countries finally abandoned gold. Time series analysis suggests that countries imposing capital controls refrained from fully utilizing their newly acquired monetary policy autonomy.
ISSN:0898-2937
DOI:10.3386/w20220