A new study by the International Monetary Fund (IMF) has found that restrictions on payments for international trade can improve a country’s current account position, while controls on capital flows can produce different effects on both external balances and exchange rates.

The study, titled ‘The Impact of Trade Payment Restrictions and Capital Controls on External Sector Balances’, said the effect of capital controls largely depends on whether governments restrict money entering or leaving their economies.

The paper, prepared by Adam Jakubik, Effie Karfaki, Tobias Krahnke, Wenjie Li, Anita Tuladhar and Chenyu Xu, examined how restrictions on international transactions affect current accounts and real exchange rates.

According to the authors, the role of such restrictions has received relatively little attention compared with macroeconomic fundamentals, structural factors and conventional economic policies used to explain movements in external balances.

“Our findings suggest that trade payment restrictions and capital controls influence the current account significantly,” the paper stated.

The study found that controls on capital inflows were positively linked to countries’ current account positions. Restrictions on capital outflows, however, were associated with weaker current accounts because they could keep capital within the domestic economy.

The researchers also identified a link between the restrictions and movements in real exchange rates. Controls on capital inflows were associated with real currency depreciation, while restrictions on capital outflows were linked to real appreciation.

Trade payment restrictions were similarly associated with real appreciation, according to the study.

To assess the effects, the researchers developed new indicators for measuring trade payment restrictions, referred to as MATR, as well as financial openness and capital controls, referred to as FinOpen.

The authors, however, cautioned against treating the findings as universal rules, noting that the study used panel regressions to estimate average relationships across countries and over time.

They also pointed out that trade payment restrictions and capital controls are often introduced when economies are already under stress, meaning the circumstances surrounding their use could influence the observed outcomes.

One point worth flagging editorially: the Dangote IPO story contains a few claims that would benefit from fact-checking before publication, particularly the “20 times” retail-investor comparison, the exact share denomination, the statement about the refinery’s previous $1bn fundraising, and the “700MW for Kaduna and Kano” claim in the RMAFC story.