The Liberalization of the Current Capital Accounts and the Real ExchangeRate
AbstractIn this paper a general equilibrium intertemporal model with optimizing consumers and producers is developed to analyze how different policies geared at liberalizing the current and capital accounts of the balance of payments affect the equilibrium real exchange rate (RER). In particular, the effects of a reduction in the level of import tariffs and of a change in the tax on foreign borrowing on the equilibrium RER are investigated. In the case of import tariffs, both a temporary and an anticipated liberalization are considered. It is shown that in the case of tariffs reduction it is not possible to know a priori whether the equilibrium RER will appreciate or depreciate. However, a liberalization of the capital account will always result in an equilibrium real appreciation in the current period. It is then argued that analyses of this type are essential to evaluate whether observed movements in the RER represent a misalignment situation or if they are an equilibrium phenomenon. The case of the recent liberalization attempts in the Southern Cone are also discussed.
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 InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 2162.
Date of creation: Feb 1987
Date of revision:
Publication status: published as "Tariffs, Capital Controls, and Equilibrium Real Exchange Rates." From Canadian Journal of Economics, Vol. 22, No. 1, pp. 79-92, (February 1989).
Note: ITI IFM
Contact details of provider:
Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
Web page: http://www.nber.org
More information through EDIRC
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.:
- Dornbusch, Rudiger, 1974. "Tariffs and nontraded goods," Journal of International Economics, Elsevier, Elsevier, vol. 4(2), pages 177-185, May.
- Razin, Assaf & Svensson, Lars E. O., 1983. "Trade taxes and the current account," Economics Letters, Elsevier, Elsevier, vol. 13(1), pages 55-57.
- Svensson, Lars E O & Razin, Assaf, 1983. "The Terms of Trade and the Current Account: The Harberger-Laursen-Metzler Effect," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(1), pages 97-125, February.
- Aizenman, Joshua, 1985.
"Tariff liberalization policy and financial restrictions,"
Journal of International Economics, Elsevier,
Elsevier, vol. 19(3-4), pages 241-255, November.
- Joshua Aizenman, 1983. "Tariff Liberalization Policy and Financial Restrictions," NBER Working Papers 1253, National Bureau of Economic Research, Inc.
- Jeffrey A. Frankel, Kenneth A. Froot, and Alejandra Mizala Salces., 1987. "Credibility, the Optimal Speed of Trade Liberalization, Real Interest Rates, and the Latin American Debt," Economics Working Papers, University of California at Berkeley 8750, University of California at Berkeley.
- Neary, J Peter, 1978. "Short-Run Capital Specificity and the Pure Theory of International Trade," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 88(351), pages 488-510, September.
- Sebastian Edwards, 1989.
"On the Sequencing of Structural Reforms,"
OECD Economics Department Working Papers
70, OECD Publishing.
- Vincent BODART & Bertrand CANDELON & Jean-François CARPANTIER, 2011.
"Real Exchange Rates, Commodity Prices and Structural Factors in Developing Countries,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales), UniversitÃ© catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES)
2011045, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Vincent Bodart & Bertrand Candelon & Jean-François Carpantier, 2013. "Real exchange rates, commodity prices and structural factors in developing countries," CREA Discussion Paper Series 13-09, Center for Research in Economic Analysis, University of Luxembourg.
- Vincent BODART & Bertrand CANDELON & Jean-François CARPANTIER, 2014. "Real exchange rates, commodity prices and structural factors in developing countries," Working Papers, Department of Research, Ipag Business School 2014-046, Department of Research, Ipag Business School.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ().
If references are entirely missing, you can add them using this form.