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Capital Controls and the International Transmission of U.S. Money Shocks

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  • JACQUES MINIANE
  • JOHN H. ROGERS

Abstract

We assess whether capital controls effectively insulate countries from U.S. monetary shocks, examining a large range of country experiences in a unified estimation framework. We estimate the effect of identified U.S. monetary shocks on the exchange rate and foreign country interest rates, and test whether countries with less open capital accounts exhibit systematically smaller responses. We find essentially no evidence of this. Other country factors such as the exchange rate regime or degree of dollarization explain more of the cross-country differences in responses. The significant differences in responses we do find are more pronounced at short horizons. Copyright 2007 The Ohio State University.

Suggested Citation

  • Jacques Miniane & John H. Rogers, 2007. "Capital Controls and the International Transmission of U.S. Money Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1003-1035, August.
  • Handle: RePEc:mcb:jmoncb:v:39:y:2007:i:5:p:1003-1035
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    1. Martin Eichenbaum & Charles L. Evans, 1995. "Some Empirical Evidence on the Effects of Shocks to Monetary Policy on Exchange Rates," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 975-1009.
    2. Ethan Kaplan & Dani Rodrik, 2002. "Did the Malaysian Capital Controls Work?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 393-440 National Bureau of Economic Research, Inc.
    3. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2001. "The external wealth of nations: measures of foreign assets and liabilities for industrial and developing countries," Journal of International Economics, Elsevier, vol. 55(2), pages 263-294, December.
    4. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, Oxford University Press, vol. 119(1), pages 1-48.
    5. Rogers, John H., 1999. "Monetary shocks and real exchange rates," Journal of International Economics, Elsevier, vol. 49(2), pages 269-288, December.
    6. Edison, Hali & Reinhart, Carmen M., 2001. "Stopping hot money," Journal of Development Economics, Elsevier, vol. 66(2), pages 533-553, December.
    7. Michael P. Dooley, 1995. "A Survey of Academic Literature on Controls over International Capital Transactions," NBER Working Papers 5352, National Bureau of Economic Research, Inc.
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