Advanced Search
MyIDEAS: Login

Capital Controls and Welfare

Contents:

Author Info

  • Shigeto Kitano

    (Research Institute for Economics and Business Administration (RIEB), Kobe University, Japan)

Abstract

This paper computes welfare levels under different degree of capital controls and compares them with the welfare level under perfect capital mobility by using the methodology of Schmitt-Grohe and Uribe (2007). We show that perfect capital mobility is not always optimal and that capital controls may enhance an economy's welfare level. There exists an optimal degree of capital-account restriction that achieves a higher level of welfare than that under perfect capital mobility, if the economy has costly financial intermediaries. The results of our analysis imply that as the domestic financial intermediaries are less efficient, the government should impose stricter capital controls in the form of a tax on foreign borrowing.

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://www.rieb.kobe-u.ac.jp/academic/ra/dp/English/DP2010-01.pdf
File Function: Revised version, 2011
Download Restriction: no

Bibliographic Info

Paper provided by Research Institute for Economics & Business Administration, Kobe University in its series Discussion Paper Series with number DP2010-01.

as in new window
Length: 29 pages
Date of creation: Jan 2010
Date of revision: Jul 2011
Handle: RePEc:kob:dpaper:dp2010-01

Contact details of provider:
Postal: 2-1 Rokkodai, Nada, Kobe 657-8501 JAPAN
Phone: +81-(0)78 803 7036
Fax: +81-(0)78 803 7059
Web page: http://www.rieb.kobe-u.ac.jp/index-e.html
More information through EDIRC

Related research

Keywords: Capital controls; Welfare; DSGE; Small open economy;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
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.:
as in new window
  1. Chinn, Menzie David & Ito, Hiro, 2005. "What Matters for Financial Development? Capital Controls, Institutions, and Interactions," Santa Cruz Department of Economics, Working Paper Series qt5pv1j341, Department of Economics, UC Santa Cruz.
  2. Prasad, Eswar & Rajan, Raghuram G., 2008. "A Pragmatic Approach to Capital Account Liberalization," IZA Discussion Papers 3475, Institute for the Study of Labor (IZA).
  3. Martin Uribe, 2006. "On Overborrowing," NBER Working Papers 11913, National Bureau of Economic Research, Inc.
  4. Kristin J. Forbes, 2005. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Working Papers 11372, National Bureau of Economic Research, Inc.
  5. Stephanie Schmitt-Grohe & Martin Uribe, 2001. "Closing Small Open Economy Models," Departmental Working Papers 200115, Rutgers University, Department of Economics.
  6. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1994. "The capital inflows problem: Concepts and issues," MPRA Paper 13902, University Library of Munich, Germany.
  7. Stephanie Schmitt-Grohe & Martin Uribe, 2004. "Optimal Simple and Implementable Monetary and Fiscal Rules," NBER Working Papers 10253, National Bureau of Economic Research, Inc.
  8. Jaime C. Guajardo, 2008. "Financial Frictions and Business Cycles in Middle-Income Countries," Central Banking, Analysis, and Economic Policies Book Series, in: Kevin Cowan & Sebastián Edwards & Rodrigo O. Valdés & Norman Loayza (Series Editor) & Klaus Schmid (ed.), Current Account and External Financing, edition 1, volume 12, chapter 8, pages 279-344 Central Bank of Chile.
  9. Barry Eichengreen & Hans-Joachim Voth, 2003. "Symposium on capital controls," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 8(3), pages 185-187.
  10. Michael P. Dooley, 1996. "A Survey of Literature on Controls over International Capital Transactions," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 639-687, December.
  11. Stephanie Schmitt-Grohe & Martin Uribe, 2002. "Solving Dynamic General Equilibrium Models Using a Second-Order Approximation to the Policy Function," NBER Technical Working Papers 0282, National Bureau of Economic Research, Inc.
  12. Ayhan Kose, M. & Prasad, Eswar S. & Taylor, Ashley D., 2011. "Thresholds in the process of international financial integration," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 147-179, February.
  13. Francisco A. Gallego & Leonardo Hernandez & Klaus Schmidt-Hebbel, 2000. "Capital Controls in Chile: Effective? Efficient?," Econometric Society World Congress 2000 Contributed Papers 0330, Econometric Society.
  14. M. Ayhan Kose & Eswar Prasad & Kenneth Rogoff & Shang-Jin Wei, 2006. "Financial Globalization: A Reappraisal," IMF Working Papers 06/189, International Monetary Fund.
  15. Martin Uribe & Vivian Z. Yue, 2003. "Country Spreads and Emerging Countries: Who Drives Whom?," NBER Working Papers 10018, National Bureau of Economic Research, Inc.
  16. Stephanie Schmitt-Grohé & Martín Uribe, 2006. "Optimal Simple and Implementable Monetary and Fiscal Rules: Expanded Version," NBER Working Papers 12402, National Bureau of Economic Research, Inc.
  17. Alfaro, Laura & Chanda, Areendam & Kalemli-Ozcan, Sebnem & Sayek, Selin, 2004. "FDI and economic growth: the role of local financial markets," Journal of International Economics, Elsevier, vol. 64(1), pages 89-112, October.
  18. Michael Klein & Giovanni Olivei, 1999. "Capital account liberalization, financial depth, and economic growth," Working Papers 99-6, Federal Reserve Bank of Boston.
  19. Auernheimer, Leonardo, 1987. "On the outcome of inconsistent programs under exchange rate and monetary rules : Allowing the market to compensate for government mistakes," Journal of Monetary Economics, Elsevier, vol. 19(2), pages 279-305, March.
  20. 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).
  21. Shigeto Kitano, 2007. "Capital Controls, Public Debt and Currency Crises," Journal of Economics, Springer, vol. 90(2), pages 117-142, March.
  22. Edwards, Sebastian & Vegh, Carlos A., 1997. "Banks and macroeconomic disturbances under predetermined exchange rates," Journal of Monetary Economics, Elsevier, vol. 40(2), pages 239-278, October.
  23. Yashiv, Eran, 1998. "Capital controls policy an intertemporal perspective," Journal of Economic Dynamics and Control, Elsevier, vol. 22(2), pages 219-245, February.
  24. Jaime Guajardo, 2008. "Financial Frictions and Business Cycles in Middle-Income Countries," IMF Working Papers 08/20, International Monetary Fund.
  25. Wyplosz, Charles, 1986. "Capital controls and balance of payments crises," Journal of International Money and Finance, Elsevier, vol. 5(2), pages 167-179, June.
  26. Daekuen Park & Jeffrey Sachs, 1987. "Capital Controls and the Timing of Exchange Regime Collapse," NBER Working Papers 2250, National Bureau of Economic Research, Inc.
  27. Mendoza, Enrique G, 1991. "Real Business Cycles in a Small Open Economy," American Economic Review, American Economic Association, vol. 81(4), pages 797-818, September.
  28. Akira Ariyoshi & Andrei Kirilenko & Inci Ötker & Bernard Laurens & Jorge Iván Canales Kriljenko & Karl Friedrich Habermeier, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund.
Full references (including those not matched with items on IDEAS)

Citations

Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. Capital controls and welfare
    by Christian Zimmermann in NEP-DGE blog on 2010-02-01 22:05:30

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:kob:dpaper:dp2010-01

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Office of Promoting Research Collaboration, Research Institute for Economics & Business Administration, Kobe University).

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.