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Sterilization of Short-Term Capital Inflows - Through Lower Interest Rates ?

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  • Michael Kumhof

Abstract

October 2000 Reductions in international interest rates are a major cause of capital flows to emerging economies. Increases in domestic interest rates are a frequent policy response to the resulting price increases. This is often unsuccessful. The paper suggests a theoretical explanation based on distinctive features of emerging financial markets, including imperfect asset substitutability and imperfect capital mobility for some sectors of the economy. It concludes that the appropriate policy response to capital inflows may be lower interest rates. Keywords: intellectual property rights, copyright, sui generis protection of expressive material, economics of information-goods, open science, "fair use," scientific databases. JEL Classification: H4, K39, O31, O34 -->

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Paper provided by Stanford University, Department of Economics in its series Working Papers with number 00018.

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Handle: RePEc:wop:stanec:00018

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Keywords: intellectual property rights; copyright; sui generis protection of expressive material; economics of information-goods; open science;

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Cited by:
  1. Mehrotra, Aaron, 2013. "On the use of sterilisation bonds in emerging Asia," BOFIT Discussion Papers 1/2013, Bank of Finland, Institute for Economies in Transition.
  2. Blaise Gadanecz & Aaron Mehrotra & Madhusudan S Mohanty, 2014. "Foreign exchange intervention and the banking system balance sheet in emerging market economies," BIS Working Papers 445, Bank for International Settlements.

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