While the traditional objectives of capital controls were to address macroeconomic stability risks, a new “externalities view” has emerged prescribing their use to contain financial stability risks. In this context, our understanding of whether capital controls are used in practice to mitigate macroeconomic or financial stability remains limited. Using a novel database on high-frequency capital account regulations for 47 advanced and emerging economies from 2008 to 2020, this paper empirically assesses this question. Our main findings are that: (a) in emerging markets there is a strong association of capital controls on inflows to mitigate risks to macro stability but not financial stability risks; (b) in advanced economies there is a robust association between capital controls on inflows to lean against the buildup of financial stability but not macro stability risks; (c) banking sector flows, but not aggregate capital flows, are strongly associated with tightening capital controls on inflows in emerging markets; and (d) pooling advanced and emerging economies attenuates regression estimates and would lead to concluding that capital controls have weak association with both financial and macro stability motives. Our results can be rationalized by the greater capital flows, more volatile business cycles and stronger interaction between business and financial cycles in emerging markets, and the deeper asset markets found in advanced economies.

Sample selection models provide an important way of accounting for economic decisions that combine discrete and continuous choices and of correcting for nonrandom sampling. Nonparametric estimators for these models are developed in this paper. These can be used for estimating shapes and important economic quantities, as in standard nonparametric regression. Endogeneity of regressors of interest is allowed for. Series estimators for these models are developed, which are useful for imposing additivity restrictions that arise from selection corrections. Convergence rates and asymptotic normality results are derived. An application to returns to schooling among Australian young females is given.