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Exchange Controls, Capital Controls, and International Financial Markets

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Author Info
Stockman, Alan C
Hernandez D, Alejandro

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Abstract

This paper examines the effects of restrictions on international financial m arkets in a general equilibrium, rational expectations model of a two -country world. State-contingent financial markets allow households t o allocate wealth optimally across states so that the imposition of e xchange and capital controls has, roughly speaking, only substitution effects but no wealth effect. Taxes or quantitative controls on purc hases of foreign currency and on the income from foreign assets reduc e international trade in goods, lower ex post welfare in the country in which they are imposed, and affect nominal prices and the exchange rate. Copyright 1988 by American Economic Association.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 78 (1988)
Issue (Month): 3 (June)
Pages: 362-74
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Handle: RePEc:aea:aecrev:v:78:y:1988:i:3:p:362-74

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Adams, Charles & Greenwood, Jeremy, 1985. "Dual exchange rate systems and capital controls: An investigation," Journal of International Economics, Elsevier, vol. 18(1-2), pages 43-63, February. [Downloadable!] (restricted)
  2. Cooley, Thomas F & LeRoy, Stephen F & Raymon, Neil, 1984. "Econometric Policy Evaluation: Note," American Economic Review, American Economic Association, vol. 74(3), pages 467-70, June. [Downloadable!] (restricted)
  3. Stockman, Alan C, 1980. "A Theory of Exchange Rate Determination," Journal of Political Economy, University of Chicago Press, vol. 88(4), pages 673-98, August. [Downloadable!] (restricted)
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  4. Persson, Torsten, 1984. "Real transfers in fixed exchange rate systems and the international adjustment mechanism," Journal of Monetary Economics, Elsevier, vol. 13(3), pages 349-369, May. [Downloadable!] (restricted)
  5. Sargent, Thomas J, 1984. "Autoregressions, Expectations, and Advice," American Economic Review, American Economic Association, vol. 74(2), pages 408-15, May. [Downloadable!] (restricted)
  6. Maurice Obstfeld, 1986. "Capital Controls, The Dual Exchange Rate, and Devaluation," NBER Working Papers 1324, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Helpman, Elhanan, 1981. "An Exploration in the Theory of Exchange-Rate Regimes," Journal of Political Economy, University of Chicago Press, vol. 89(5), pages 865-90, October. [Downloadable!] (restricted)
  8. Cumby, Robert E., 1984. "Monetary policy under dual exchange rates," Journal of International Money and Finance, Elsevier, vol. 3(2), pages 195-208, August. [Downloadable!] (restricted)
  9. Robert E. Cumby, 1984. "Monetary Policy Under Dual Exchange Rates," NBER Working Papers 1424, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  10. Alan C. Stockman & Lars E.O. Svensson, 1987. "Capital Flows, Investment, and Exchange Rates," NBER Working Papers 1598, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  11. Lucas, Robert E, Jr, 1978. "Asset Prices in an Exchange Economy," Econometrica, Econometric Society, vol. 46(6), pages 1429-45, November. [Downloadable!] (restricted)
  12. Svensson, Lars E. O., 1985. "Currency prices, terms of trade, and interest rates: A general equilibrium asset-pricing cash-in-advance approach," Journal of International Economics, Elsevier, vol. 18(1-2), pages 17-41, February. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Huizinga, H., 1996. "The taxation implicit in two-tiered exchange rate systems," Discussion Paper 100, Tilburg University, Center for Economic Research. [Downloadable!]
  2. Axel Dreher & Lars-H.R. Siemers, 2003. "The Intriguing Nexus Between Corruption and Capital Account Restrictions," Development and Comp Systems 0306004, EconWPA, revised 07 Apr 2004. [Downloadable!]
    Other versions:
  3. Marvin Goodfriend & Robert G. King, 2001. "The case for price stability," Working Paper 01-02, Federal Reserve Bank of Richmond. [Downloadable!]
    Other versions:
  4. Salvador Valdés, 1989. "Control de Cambios en Países en Desarrollo," Cuadernos de Economía (Latin American Journal of Economics), Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 26(77), pages 115-144. [Downloadable!]
  5. Alberto Giovannini, 1987. "International Capital Mobility and Tax Evasion," NBER Working Papers 2460, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  6. Alberto Giovannini & Jan Won Park, 1989. "Capital Controls and International Trade Finance," NBER Working Papers 3112, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  7. Lars E.O. Svensson, 1989. "Trade in Risky Assets," NBER Working Papers 2403, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  8. Vittorio Grilli & Nouriel Roubini, 1990. "Financial Integration, Liquidity and Exchange Rates," Cowles Foundation Discussion Papers 939, Cowles Foundation, Yale University. [Downloadable!]
    Other versions:
  9. Alberto Alesina & Vittorio Grilli & Gian Maria Milesi-Ferrett, 1993. "The Political Economy of Capital Controls," NBER Working Papers 4353, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Deergha Raj Adhikari, 2006. "Is capital really mobile across the border?," Applied Economics Letters, Taylor and Francis Journals, vol. 13(8), pages 489-492, June. [Downloadable!] (restricted)
  11. John T. Cuddington & Hong Liang & Shihua Lu, 1996. "Uncertainty, Trade, and Capital Flows in Sub-Saharan Africa," International Finance 9602002, EconWPA. [Downloadable!]
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