Abstract: The management of cross-border capital flows is an important issue faced by emerging market countries. This paper discusses the impact of capital controls and foreign exchange reserves on this issue and their combined utility. This paper first analyzes the channels in which foreign exchange reserves affect capital flows, and then constructs a three-phase loan model to derive the relationship between foreign exchange reserves, capital controls and capital flows. Based on the annual data of 22 emerging market countries from 1994 to 2017, panel system GMM method and panel binary selection model are used to do empirical research. Finally, the robustness test is performed by replacing the foreign exchange reserves' proxy variable and China's specific analysis. The results show that for emerging market countries, increasing foreign exchange reserves will help attract short-term capital inflows and curb capital outflows. Capital inflow controls have no significant impact on capital inflows, but strengthening capital outflow controls can effectively reduce capital outflows. Strengthening capital controls will help reduce the probability of “sudden stop”; the stricter capital controls, the more foreign exchange reserves need to prevent “sudden stop”. The two policies complement each other. China, as the largest emerging market country, has its particularities. Capital controls have a small impact on capital flows. There is still a complementary relationship between foreign exchange reserves and capital control policies.

Key words: capital inflow control, capital outflow control, foreign exchange reserves, sudden stop