In the aftermath of the global financial crisis, many emerging market countries resorted to capital controls to tackle the excessive surge of capital inflows. A number of recent research papers have suggested that the imposition of controls may have imposed negative externalities on other countries by deflecting flows. Our aim in the research reported in this paper is to construct a comprehensive global econometric model which captures the dynamic interactions of capital flows with domestic and global fundamentals, and to assess the efficacy of capital controls and potential deflection effects on other countries. The results suggest that capital controls are effective for some countries in the short run, but have no lasting effects. Moreover, there is only limited evidence of deflection effects for a small number of emerging market countries.

Books reviewed: William Coleman and Alf Hagger, The Rage Over Economic Rationalism and the Campaign Against Australian Economists Hian Teck Hoon, Trade, Jobs and Wages Yoram Amiel and Frank A. Cowell, Thinking About Inequality Paul Downward and Alistair Dawson, The Economics of Professional Team Sports George Fane, Capital Mobility, Exchange Rates and Economic Crises Ben S. Bernanke, Thomas Laubach, Frederic S. Mishkin and Adam S. Posen, Inflation Targeting: Lessons from the International Experience Martin F.J. Prachowny, The Kennedy-Johnson Tax Cut William D. Nordhaus and Joseph Boyer, 'Warming the World - Economic Models of Global Warming' David S. Evans and Richard Schmalensee, Paying with Plastic: The Digital Revolution in Buying and Borrowing.