Do Capital Controls Slow Cross-Border Payments in the Last Mile? Preliminary Evidence

Cross-border payments face multiple challenges that may result in slow transaction speed, particularly at the beneficiary leg, which constitutes the last mile of the payment process. This paper measures whether capital controls are associated with slower cross-border payments, using two novel cross-country datasets derived from microeconomic data. While it does not establish causality, preliminary evidence suggests that the effect is statistically significant and sizeable. A one-standard-deviation increase in the Financial Account Restriction Index, our measure of capital controls, is associated with a delay of 4 to 8 hours at the beneficiary leg. The effect is stronger in Emerging and Developing Economies, and heterogeneous across geographic regions.