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Australia's experience with the variable deposit requirement

Author

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  • Australian Treasury

    (Treasury, Government of Australia)

Abstract

This article examines the implementation of the Variable Deposit Requirement (VDR) capital control scheme in Australia in the 1970s. It notes that while capital controls can play a role in certain circumstances, they should not be used as a substitute for addressing underlying policy needs or financial sector reforms of an economy. The scheme was short-term in nature, and depended on subjective judgements about what level of capital inflow was appropriate at the time, and was unrelated to long-term policy objectives. The VDR was superseded by the adoption of a flexible exchange rate which allowed monetary policy to operate with greater coherence and independence from other objectives, such as industry policies.

Suggested Citation

  • Australian Treasury, 1999. "Australia's experience with the variable deposit requirement," Economic Roundup, The Treasury, Australian Government, issue 3, pages 45-56, July.
    • Handle: RePEc:tsy:journl:journl_tsy_er_1999_3_3
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    File URL: http://archive.treasury.gov.au/documents/193/PDF/round5.pdf
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    Citations

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    Cited by:

    1. Ghosh, Atish R. & Ostry, Jonathan D. & Qureshi, Mahvash S., 2018. "Taming the Tide of Capital Flows: A Policy Guide," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262037165, December.
    2. Atish R Ghosh & Jun I Kim & Mahvash S Qureshi, 2020. "What’s in a name? That which we call capital controls," Economic Policy, CEPR, CESifo, Sciences Po;CES;MSH, vol. 35(101), pages 147-208.

    More about this item

    Keywords

    capital; foreign exchange; financial markets;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F31 - International Economics - - International Finance - - - Foreign Exchange
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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