Capital controls and the political discount: The Spanish experience in the late 1980s
AbstractThis article examines the wedge between Madrid and London peseta interest rates in the late 1980s, when controls on capital inflows were imposed. A model of onshore and offshore markets and of arbitrage between the two is proposed, where arbitrage has a dynamic structure caused by the process of controls avoidance. The model implies, first, that the wedge can follow an ARMA process and, second, that onshore and offshore rates can be cointegrated and can adjust according to an error correction mechanism. These models are consistent with the data and show that the monetary independence given by the controls was limited. Copyright Kluwer Academic Publishers 1996
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoArticle provided by Springer in its journal Open Economies Review.
Volume (Year): 7 (1996)
Issue (Month): 4 (October)
Contact details of provider:
Web page: http://www.springerlink.com/link.asp?id=100323
capital controls; country premium; F32; F36;
Find related papers by JEL classification:
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
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.:
- Phylaktis, Kate, 1988. "Capital controls: The case of Argentina," Journal of International Money and Finance, Elsevier, vol. 7(3), pages 303-320, September.
- Maurice Obstfeld, 1986.
"Rational and Self-Fulfilling Balance-of-Payments Crises,"
NBER Working Papers
1486, National Bureau of Economic Research, Inc.
- Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
- Giovannini, Alberto & Park, Jae Won, 1992. "Capital controls and international trade finance," Journal of International Economics, Elsevier, vol. 33(3-4), pages 285-304, November.
- Swanson, Peggy E., 1987. "Capital market integration over the past decade: The case of the US dollar," Journal of International Money and Finance, Elsevier, vol. 6(2), pages 215-225, June.
- Dellas, H. & Stockman, A.C., 1988.
"Self-Fullfilling Expectations, Speculative Attacks And Capital Controls,"
RCER Working Papers
138, University of Rochester - Center for Economic Research (RCER).
- Dellas, Harris & Stockman, Alan, 1993. "Self-Fulfilling Expectations, Speculative Attack, and Capital Controls," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(4), pages 721-30, November.
- Melvin, Michael & Schlagenhauf, Don, 1985. "A Country Risk Index: Econometric Formulation and an Application to Mexico," Economic Inquiry, Western Economic Association International, vol. 23(4), pages 601-19, October.
- Aliber, Robert Z, 1973. "The Interest Rate Parity Theorem: A Reinterpretation," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1451-59, Nov.-Dec..
- Bacchetta, Philippe, 1990. "Temporary capital controls in a balance-of- payments crisis," Journal of International Money and Finance, Elsevier, vol. 9(3), pages 246-257, September.
- Barry Eichengreen & Charles Wyplosz, 1993. "The Unstable EMS," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 24(1), pages 51-144.
- Lam, Swee-Sum & Pak, Hoe-Soon, 1993. "A note on capital market segmentation: new tests and evidence," Pacific-Basin Finance Journal, Elsevier, vol. 1(3), pages 263-276, September.
- Gros, Daniel, 1992. "Capital controls and foreign exchange market crises in the EMS," European Economic Review, Elsevier, vol. 36(8), pages 1533-1544, December.
- Daniel Gros, 1987. "The Effectiveness of Capital Controls: Implications for Monetary Autonomy in the Presence of Incomplete Market Separation," IMF Staff Papers, Palgrave Macmillan, vol. 34(4), pages 621-642, December.
If references are entirely missing, you can add them using this form.