The impact of foreign exchange controls on the economic performance of emerging economies and South Africa in particular

Capital controls relaxation is one critical macroeconomic policycomponent that constitutes the broader framework of economic reformpolicies. Research work has been done, especially on developedcountries, to establish if relaxation of capital controls does improveeconomic performance of a country. The literature reviewed supports thisnotion but the results from causal studies lack consistency, especially whenstudying the emerging economies. This research reviewed the literature on the impact of capital accountliberalization and the pace thereof on economic growth of emergingeconomies. Then, a quantitative research methodology was followedwhereby 67 emerging economies, geographically grouped into fivecontinents, were studied over a period of 25 years, 1980 to 2005. Theeconomic growth rate was traced as the emerging economies relaxed ortightened their capital controls to establish if there was any kind ofrelationship. It was statistically proven that in emerging economiesrelaxation of capital controls had a significantly low impact on economicgrowth and that a gradual relaxation approach positively impactedeconomic performance. Copyright © 2008, University of Pretoria. All rights reserved. The copyright in this work vests in the University of Pretoria. No part of this work may be reproduced or transmitted in any form or by any means, without the prior written permission of the University of Pretoria Please cite as follows: Sithole, T 2008, The impact of foreign exchange controls on the economic performance of emerging economies and South Africa in particular, MBA dissertation, University of Pretoria, Pretoria, viewed yymmdd < http://upetd.up.ac.za/thesis/available/etd-03172010-114332/ >