Advanced Search
MyIDEAS: Login to save this paper or follow this series

Capital Control, Speculation and Exchange Rate Volatility

Contents:

Author Info

  • Mei-Lie Chu
Registered author(s):

    Abstract

    This paper studies a plausible connection among rational speculators, exchange rate volatility and capital controls. When Krugman (1999) asserted that there should be appropriate controls on international capital movements to avoid currency volatilities from speculative activities, this paper shows whether to take capital controls depends on types of shocks and the risk preference of rational speculators. (1)If only current account shocks occur, the increase in the risk preference of rational speculators will decrease the conditional variance of exchange rates. In this case, the best policy is to let capitals freely move in the world. (2)If only interest rate shocks occur, the conditional variance of the exchange rate is monotonically increasing in the risk preference of rational speculators. Under such circumstance, the controls over international capital movements indeed decrease the exchange rate volatility. (3)When both current account and capital account shocks occur, then, if speculators are more risky, capital controls decrease exchange-rate volatility; however, if speculators are less risky, free capital movements can temper the exchange rates response to transitory shocks

    Download Info

    If 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.
    File URL: http://repec.org/esFEAM04/up.5728.1080649067.pdf
    Download Restriction: no

    Bibliographic Info

    Paper provided by Econometric Society in its series Econometric Society 2004 Far Eastern Meetings with number 652.

    as in new window
    Length:
    Date of creation: 11 Aug 2004
    Date of revision:
    Handle: RePEc:ecm:feam04:652

    Contact details of provider:
    Phone: 1 212 998 3820
    Fax: 1 212 995 4487
    Email:
    Web page: http://www.econometricsociety.org/pastmeetings.asp
    More information through EDIRC

    Related research

    Keywords: Capital Controls; Speculation; Exchange Rate Volatility;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    No references listed on IDEAS
    You can help add them by filling out this form.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as in new window

    Cited by:
    1. Seyed Komail Tayebi & Leila Torki, 2012. "Effects of Financial Liberalization on Macroeconomic Volatilities: Applications to Economic Growth, Exchange Rate and Exchange Rate Pass-Through," Iranian Economic Review, Economics faculty of Tehran university, vol. 17(1), pages 71-84, winter.

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:ecm:feam04:652. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Christopher F. Baum).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.