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Financial flows, macro-prudential policies, capital restrictions and institutions: what do gravity equations tell us?

Author

Listed:
  • Jean-Charles Bricongne
  • Antoine Cosson
  • Albane Garnier-Sauveplane
  • Rémy Lecat
  • Irena Peresa
  • Yuliya Vanzhulova
Abstract
This paper analyzes the impact on financial flows of institutional factors promoting financial integration such as European integration or trying to tame them such as capital control or macro-prudential policies. We use a detailed database of bilateral financial assets and construct gravity models, for foreign direct investment, portfolio flows and other investments. Capital control policies have limited and disparate effects, being particularly effective through restrictions on inward flows for destination countries. The impacts of macro-prudential measures are complex, with macro-prudential measures in the origin country financial sector having a positive impact on outward capital flows and macroprudential measures in destination countries having a negative impact on inward capital flows. European integration has played a positive role on financial flows. We also emphasize the benefits of cooperation between the origin and destination countries, both for capital control and macro-prudential measures.

Suggested Citation

  • Jean-Charles Bricongne & Antoine Cosson & Albane Garnier-Sauveplane & Rémy Lecat & Irena Peresa & Yuliya Vanzhulova, 2021. "Financial flows, macro-prudential policies, capital restrictions and institutions: what do gravity equations tell us?," Working papers 842, Banque de France.
    • Handle: RePEc:bfr:banfra:842
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    References listed on IDEAS

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    1. Artemis Stratopoulou, 2023. "Assessing the Effects of Capital Account Liberalization on Savings," Open Economies Review, Springer, vol. 34(5), pages 1107-1170, November.

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    More about this item

    Keywords

    Gravity Equation; International Financial Assets and Flows; Macro-Prudential Measures; Restrictions to Financial Flows; European Integration;
    All these keywords.

    JEL classification:

    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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