Capital account liberalization as a signal
AbstractThis paper presents a model in which a government's current capital controls policy signals future policies. Controls on capital outflows evolve in response to news on technology, contingent on government attitudes toward taxation of capital. When there is uncertainty over government types, a policy of liberal capital outflows sends a positive signal that may trigger a capital inflow. This prediction is consistent with the experience of several countries that have recently liberalized their capital accounts.
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Bibliographic InfoPaper provided by Federal Reserve Bank of New York in its series Staff Reports with number 11.
Date of creation: 1996
Date of revision:
Publication status: Published in American Economic Review 87, no. 1 (March 1997): 138-54
Other versions of this item:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
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