DOMESTIC AND SYSTEMIC DETERMINANTS OF CAPITAL CONTROLS IN THE DEVELOPED AND DEVELOPING-WORLD

This paper examines the utility of and preference for controls on shor tterm capital, Recent work in international political economy has argu ed that the increasing internationalization of finance has constrained the ability of governments to pursue independent monetary policies. F or the most part this conclusion has been reached through an examinati on of a small number of advanced industrialized countries, This articl e argues not only that the globalization of finance is far from all-en compassing but also that domestic forces play a more significant role in explaining the implementation and removal of capital controls than do systemic factors. Capital controls are more likely to be put in pla ce by governments that repress the financial sector, that choose to ma intain a fixed exchange rate, and that are facing balance-of-payments crises. These propositions are tested using a random effects probit mo del on a panel of ninety-one countries from 1967 to 1992.