IDEAS home Printed from https://ideas.repec.org/a/taf/intecj/v16y2002i4p27-51.html
   My bibliography  Save this article

The Effects of Capital Controls on Exchange Rate Volatility and Output

Author

Listed:
  • M. Frenkel
  • G. Shimidt
  • G. Stadtmann
  • Nickle Christiane

Abstract

This paper extends the Dornbusch model of overshooting exchange rates to discuss both exchange rate and output effects of capital controls that involve additional costs for International asset transactions.We show that, on the one hand, such capital controls have the merit of reducing the volatility of exchange rate volatility in the sort run and induces costs for the real sector in the form of lower equilibrium output levels. [F32, F41]

Suggested Citation

  • M. Frenkel & G. Shimidt & G. Stadtmann & Nickle Christiane, 2002. "The Effects of Capital Controls on Exchange Rate Volatility and Output," International Economic Journal, Taylor & Francis Journals, vol. 16(4), pages 27-51.
  • Handle: RePEc:taf:intecj:v:16:y:2002:i:4:p:27-51
    DOI: 10.1080/10168730200000027
    as

    Download full text from publisher

    File URL: http://www.tandfonline.com/doi/abs/10.1080/10168730200000027
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. 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.
    2. Raffer, Kunibert, 1998. "The tobin tax: Reviving a discussion," World Development, Elsevier, vol. 26(3), pages 529-538, March.
    3. Carmen M. Reinhart & R. Todd Smith, 1996. "Too much of a good thing: the macroeconomic effects of taxing capital inflows," Proceedings, Federal Reserve Bank of San Francisco, pages 436-464.
    4. Yin-Wong Cheung & Menzie D. Chinn, 1999. "Macroeconomic Implications of the Beliefs and Behavior of Foreign Exchange Traders," NBER Working Papers 7417, National Bureau of Economic Research, Inc.
    5. Edison, Hali J. & Reinhart, Carmen M., 1999. "Capital controls during financial crises: the cases of Malaysia and Thailand," Proceedings, Federal Reserve Bank of San Francisco, issue Sep, pages 1-36.
    6. Vittorio Grilli & Gian Maria Milesi-Ferretti, 1995. "Economic Effects and Structural Determinants of Capital Controls," IMF Staff Papers, Palgrave Macmillan, vol. 42(3), pages 517-551, September.
    7. Goldstein, Morris, 1995. "Coping with too much of a good thing : policy responses for large capital inflows in developing countries," Policy Research Working Paper Series 1507, The World Bank.
    8. Natalia T. Tamirisa & R. B. Johnston, 1998. "Why Do Countries Use Capital Controls?," IMF Working Papers 98/181, International Monetary Fund.
    9. De Long, J Bradford & Andrei Shleifer & Lawrence H. Summers & Robert J. Waldmann, 1990. "Noise Trader Risk in Financial Markets," Journal of Political Economy, University of Chicago Press, vol. 98(4), pages 703-738, August.
    10. Ball, Laurence, 1999. "Efficient Rules for Monetary Policy," International Finance, Wiley Blackwell, vol. 2(1), pages 63-83, April.
    11. Buch, Claudia M. & Heinrich, Ralph P. & Pierdzioch, Christian, 1998. "Taxing short-term capital flows - An option for transition economies?," Kiel Discussion Papers 321, Kiel Institute for the World Economy (IfW).
    12. De Long, J Bradford, et al, 1991. "The Survival of Noise Traders in Financial Markets," The Journal of Business, University of Chicago Press, vol. 64(1), pages 1-19, January.
    13. Akira Ariyoshi & Andrei A Kirilenko & Inci Ötker & Bernard J Laurens & Jorge I Canales Kriljenko & Karl F Habermeier, 2000. "Capital Controls; Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund.
    14. Alberto Alesina & Vittorio Grilli & Gian Maria Milesi-Ferrett, 1993. "The Political Economy of Capital Controls," NBER Working Papers 4353, National Bureau of Economic Research, Inc.
    15. Dornbusch, Rudiger, 1976. "Expectations and Exchange Rate Dynamics," Journal of Political Economy, University of Chicago Press, vol. 84(6), pages 1161-1176, December.
    16. Allen, Helen & Taylor, Mark P, 1990. "Charts, Noise and Fundamentals in the London Foreign Exchange Market," Economic Journal, Royal Economic Society, vol. 100(400), pages 49-59, Supplemen.
    17. Taylor, Mark P. & Allen, Helen, 1992. "The use of technical analysis in the foreign exchange market," Journal of International Money and Finance, Elsevier, vol. 11(3), pages 304-314, June.
    18. Christopher J. Neely, 1999. "An introduction to capital controls," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 13-30.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Bergman, U. Michael & Jellingsø, Mads, 2010. "Monetary policy during speculative attacks: Are there adverse medium term effects?," The North American Journal of Economics and Finance, Elsevier, vol. 21(1), pages 5-18, March.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:intecj:v:16:y:2002:i:4:p:27-51. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Chris Longhurst). General contact details of provider: http://www.tandfonline.com/RIEJ20 .

    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 CitEc recognized a reference but did not link an item in RePEc 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.