This book, first published in 1988, is an attempt to explain the political sources and implications of the policies of one country toward an economic activity of critical importance in determining the nature and scope of the international financial system, the multinational corporation and economic interdependence: the flows of capital across national boundaries.

This paper focuses on the coordination problem among borrowing countries imposing controls on capital infl ows. In a simple model of capital flows and controls, we show that inflow restrictions distort international capital flows to other countries and that, in turn, such capital flow deflection may lead to a policy response. We then test the theory using data on inflow restrictions and gross capital inflows for a large sample of developing countries between 1995 and 2009. Our estimation yields strong evidence that capital controls deflect capital flows to other borrowing countries with similar economic characteristics. Notwithstanding these strong cross-border spillover effects, we do not find evidence of a policy response.

At head of title: Institut universitaire de hautes eÌ tudes internationales. Includes bibliographies and index.