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Title: Capital controls: a tool to protect an economy under pressure? The cases of Cyprus, a eurozone member, and Iceland

Authors: Georgios Gad; Emmanuel Petrakis

Addresses: International Business Department, Care Direct S.A., 8 Dervenakion Street, Dafni, 17235, Athens, Greece; MBA Programme, School of Social Sciences, Hellenic Open University, Parodos Aristotelous 18, 26-335, Patra, Greece ' Department of Economics, University of Crete, Gallos University Campus, Rethymnon, Crete, GR 74100 Greece; MBA Programme, School of Social Sciences, Hellenic Open University, Parodos Aristotelous 18, 26-335, Patra, Greece

Abstract: This paper considers the effectiveness of capital controls as a protective action. We analyse the recent cases of Iceland and Cyprus and examine the extent to which the controls on free capital movement delivered the outcome that motivated their imposition in each country. The methodology used examines main macro-economic indicators and attempts to locate significant variations pre and post capital controls. The results indicate that controls were only partially successful. In Iceland they did not manage to control the pressure over foreign exchange rate. In case of Cyprus controls achieved only partially to control outflows. Belonging to the eurozone was not proven to be a negative factor for success of the measures in Cyprus.

Keywords: capital controls; capital controls effectiveness; capital flows; financial crisis; eurozone; international economics; Cyprus; Iceland.

DOI: 10.1504/IJDSRM.2020.110130

International Journal of Decision Sciences, Risk and Management, 2020 Vol.9 No.1/2, pp.106 - 128

Received: 11 Jan 2019
Accepted: 21 Jan 2019

Published online: 25 Sep 2020 *

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