Closing time: Reputational constraints on capital account policy in emerging markets

Steven Liao, Daniel McDowell

Research output: Contribution to journalArticlepeer-review

1 Scopus citations


Do international reputational concerns constrain governments’ economic policy choices? We assess this question by analyzing emerging market decisions to tighten restrictions on capital outflows. While policymakers should be more likely to tighten restrictions to protect their economies as capital flow volatility (CFV) increases, investors view outflow controls as heterodox policies that violate investment contracts. We argue that the effect of CFV on outflow controls depends on the use of controls in peer markets. When peers are open, governments anticipate that controls will come at a high cost to their market reputations as heterodox measures send a negative signal to investors among a crowd of liberal peers. Conversely, when peers are closed, using controls should do less damage to an economy’s reputation. For 25 emerging markets from 1995–2015, we show that CFV is associated with outflow controls, but only when market peers are already closed, suggesting reputational concerns can limit policy autonomy.

Original languageEnglish (US)
Pages (from-to)543-568
Number of pages26
JournalReview of International Organizations
Issue number3
StatePublished - Jul 2022


  • Capital controls
  • Capital flow volatility
  • Emerging markets
  • Reputation

ASJC Scopus subject areas

  • Economics and Econometrics
  • Political Science and International Relations


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