Trade and Capital Liberalisation: An Empirical Inquiry to the Effect of Capital Control Policy and Free Trade Agreement on Countries’ Welfare

Abstract

This study aims to identify the need for ambiguity as a result of mixed and contradictory suggestions of the trade agreement and capital liberalisation on a country’s welfare. Using more comprehensive datasets on inflow and outflow capital control, we find significant and mixed capital control effects on countries’ welfare. The model also signifies consistent negative effects of the trade agreement on welfare coupled with proof of capital control’s reduction effect on the trade agreement’s effects. Further analysis also reveals the varying home and host countries’ capital policy effects on welfare.