Beyond Binary: A Policy-Intensity Measure of Capital Flow Management

This paper introduces the FinOpen index, a novel measure of capital flow management for 193 countries from 1996 to 2022. Using information from the IMF’s Annual Report on Exchange Arrangements and Exchange Restrictions (AREAER), the index is constructed by estimating the level of openness annually and updating it daily by incorporating changes in capital flow management measures (CFMs). Therefore, this index goes beyond the traditional indexes that rely on binary labels that only distinguish between full capital openness and any control. Within the range of [0, 1], the FinOpen index quantifies granular policy intensity and allows comparisons across countries (with higher values indicate greater capital openness). In addition, the dataset extends back to 1960 for 42 emerging and developing countries, and the methodology can be applied to construct long-term series for other countries.