The dramatic swings in international capital movements in recent years have renewed interest in restrictions on capital flows. This paper provides a model of international asset flows and domestic equity price formation incorporating three restrictions on capital flows. A transaction tax introduces significant asymmetries in the reaction of asset prices to financial and real shocks but has no long-lived effects. Policies targeted to the level of net foreign debt by imposing a tax or outright controls do influence the steady-state levels of the real exchange rate and relative equity prices. Copyright 2000 by Blackwell Publishing Ltd.
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Volume (Year): 8 (2000) Issue (Month): 1 (February) Pages: 74-85 Download reference. The following formats are available: HTML
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