Abstract
Capital control have been extensively used as policy instrument to dissipate the effects of large volume of international capital flows to Emerging Market economies since Global Financial Crisis. Such capital control measures appeared to have cross boundary consequences on capital inflows and outflows. Using network analysis of capital flows in spatial regression framework, the paper tries to analyze the impact of cross-border capital flows across countries. The spatial regression estimates implies that the impact of capital control measures have significant impact on the international capital mobility across similar countries. Further the spillover impact showcase complementarity during pre Global Financial Crisis whereas substituatibility appeared to have dominated during post crisis period. The novelty of the approach is that the directional impact of capital control spillover impact have been estimated parsimoniously without incorporating any identification restrictions on country characteristics.
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