Capital Controls and Recovery from the Financial Crisis of the 1930s
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.
We thank conference and seminar participants at Oxford University, UC Davis, and the Bank of Norway-Graduate Institute of International Studies Conference for useful suggestions. Melissa Daniel and Rose York provided invaluable research assistance. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Kris James Mitchener & Kirsten Wandschneider, 2015. "Capital controls and recovery from the financial crisis of the 1930s," Journal of International Economics, vol 95(2), pages 188-201. citation courtesy of