IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

The Political Economy of Capital Controls

  • Alesina, Alberto F
  • Grilli, Vittorio
  • Milesi-Ferretti, Gian Maria

This paper studies the institutional and political determinants of capital controls in a sample of 20 OECD countries for the period 1950 89. One of the most interesting results is that capital controls are more likely to be imposed by strong governments, which have a relatively `free' hand over monetary policy, because the Central Bank is not very independent. By imposing capital controls these governments raise more seigniorage revenue and keep interest rates artificially low. As a result, public debt accumulates at a slower rate than otherwise. This suggests that an institutional reform which makes the Central Bank more independent makes it more difficult for the government to finance its budget. The tightening of the fiscal constraint may force the government to adjust towards a more `sound' fiscal policy. We also find that, as expected, and in accordance with the theory, capital controls are more likely to be introduced when the exchange rate is pegged or managed. We found no effects of capital controls on growth, however, and reject rather strongly the hypothesis that capital controls reduce growth.

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.cepr.org/active/publications/discussion_papers/dp.php?dpno=793
Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 793.

as
in new window

Length:
Date of creation: Jul 1993
Date of revision:
Handle: RePEc:cpr:ceprdp:793
Contact details of provider: Postal: Centre for Economic Policy Research, 77 Bastwick Street, London EC1V 3PZ.
Phone: 44 - 20 - 7183 8801
Fax: 44 - 20 - 7183 8820

Order Information: Email:


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. Alesina, Alberto & Tabellini, Guido, 1989. "External debt, capital flight and political risk," Journal of International Economics, Elsevier, vol. 27(3-4), pages 199-220, November.
  2. Alesina, A. & Drazen, A., 1991. "Why Are Stabilizations Delayed?," Papers 6-91, Tel Aviv - the Sackler Institute of Economic Studies.
  3. Martin Feldstein, 1982. "Domestic Saving and International Capital Movements in the Long Run and the Short Run," NBER Working Papers 0947, National Bureau of Economic Research, Inc.
  4. Dooley, Michael P & Isard, Peter, 1980. "Capital Controls, Political Risk, and Deviations from Interest-Rate Parity," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 370-84, April.
  5. Razin, Assaf & Sadka, Efraim, 1991. "Efficient investment incentives in the presence of capital flight," Journal of International Economics, Elsevier, vol. 31(1-2), pages 171-181, August.
  6. Tesar, L.L., 1988. "Savings, Investment And International Capital Flows," RCER Working Papers 154, University of Rochester - Center for Economic Research (RCER).
  7. Martin Feldstein & Charles Horioka, 1979. "Domestic Savings and International Capital Flows," NBER Working Papers 0310, National Bureau of Economic Research, Inc.
  8. Nouriel Roubini & Jeffrey Sachs, 1988. "Political and Economic Determinants of Budget Deficits in the IndustrialDemocracies," NBER Working Papers 2682, National Bureau of Economic Research, Inc.
  9. Grilli, Vittorio & Roubini, Nouriel, 1993. "Liquidity, capital controls, and exchange rates," Journal of International Money and Finance, Elsevier, vol. 12(2), pages 139-153, April.
  10. Roubini, Nouriel & Swagel, Phillip & Ozler, Sule & Alesina, Alberto, 1996. "Political Instability and Economic Growth," Scholarly Articles 4553024, Harvard University Department of Economics.
  11. Nouriel Roubini & Xavier Sala-i-Martin, 1991. "Financial Repression and Economic Growth," NBER Working Papers 3876, National Bureau of Economic Research, Inc.
  12. Roubini, Nouriel & Sachs, Jeffrey D., 1989. "Political and economic determinants of budget deficits in the industrial democracies," European Economic Review, Elsevier, vol. 33(5), pages 903-933, May.
  13. Brock, Philip L, 1989. "Reserve Requirements and the Inflation Tax," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 21(1), pages 106-21, February.
  14. James Tobin, 1978. "A Proposal for International Monetary Reform," Eastern Economic Journal, Eastern Economic Association, vol. 4(3-4), pages 153-159, Jul/Oct.
  15. Roubini, N. & Sala-I-Martin, X., 1991. "Financial development , the Trade Regime and Economic Growth," Papers 646, Yale - Economic Growth Center.
  16. van Wijnbergen, Sweder, 1990. "Capital Controls and the Real Exchange Rate," Economica, London School of Economics and Political Science, vol. 57(225), pages 15-28, February.
  17. Bacchetta, Philippe, 1990. "Temporary capital controls in a balance-of- payments crisis," Journal of International Money and Finance, Elsevier, vol. 9(3), pages 246-257, September.
  18. N. Gregory Mankiw, 1987. "The Optimal Collection of Seigniorage: Theory and Evidence," NBER Working Papers 2270, National Bureau of Economic Research, Inc.
  19. Cukierman, Alex & Edwards, Sebastian & Tabellini, Guido, 1992. "Seigniorage and Political Instability," American Economic Review, American Economic Association, vol. 82(3), pages 537-55, June.
  20. Stockman, Alan C & Hernandez D, Alejandro, 1988. "Exchange Controls, Capital Controls, and International Financial Markets," American Economic Review, American Economic Association, vol. 78(3), pages 362-74, June.
  21. Alesina, Alberto, et al, 1996. " Political Instability and Economic Growth," Journal of Economic Growth, Springer, vol. 1(2), pages 189-211, June.
  22. Kenneth S. Rogoff, 1984. "Can exchange rate predictability be achieved without monetary convergence? : evidence from the EMS," International Finance Discussion Papers 245, Board of Governors of the Federal Reserve System (U.S.).
  23. Francesco Giavazzi & Marco Pagano, 1989. "Confidence Crises and Public Debt Management," NBER Working Papers 2926, National Bureau of Economic Research, Inc.
  24. Jappelli, Tullio & Pagano, Marco, 1992. "Saving, Growth and Liquidity Constraints," CEPR Discussion Papers 662, C.E.P.R. Discussion Papers.
  25. Alberto Alesina & Nouriel Roubini, 1990. "Political Cycles in OECD Economies," NBER Working Papers 3478, National Bureau of Economic Research, Inc.
  26. Obstfeld, Maurice, 1986. "Rational and Self-fulfilling Balance-of-Payments Crises," American Economic Review, American Economic Association, vol. 76(1), pages 72-81, March.
  27. Giovannini, Alberto, 1991. "Government Revenue from Financial Repression," CEPR Discussion Papers 489, C.E.P.R. Discussion Papers.
  28. Dornbusch, Rudiger, 1986. "Special Exchange Rates for Capital Account Transactions," World Bank Economic Review, World Bank Group, vol. 1(1), pages 3-33, September.
  29. de Macedo, Jorge Braga & Sebastiao, Manuel, 1989. "Public debt and implicit taxes The Portuguese experience," European Economic Review, Elsevier, vol. 33(2-3), pages 573-579, March.
  30. Daekuen Park & Jeffrey Sachs, 1987. "Capital Controls and the Timing of Exchange Regime Collapse," NBER Working Papers 2250, National Bureau of Economic Research, Inc.
  31. Guidotti, Pablo E. & Vegh, Carlos A., 1992. "Macroeconomic interdependence under capital controls : A two-country model of dual exchange rates," Journal of International Economics, Elsevier, vol. 32(3-4), pages 353-367, May.
  32. Jeremy Greenwood & Kent P. Kimbrough, 1985. "Capital Controls and Fiscal Policy in the World Economy," Canadian Journal of Economics, Canadian Economics Association, vol. 18(4), pages 743-65, November.
  33. Roubini, Nouriel & Alesina, Alberto, 1992. "Political Cycles in OECD Economies," Scholarly Articles 4553025, Harvard University Department of Economics.
  34. Wyplosz, Charles, 1986. "Capital controls and balance of payments crises," Journal of International Money and Finance, Elsevier, vol. 5(2), pages 167-179, June.
  35. Alberto Giovannini & Martha de Melo, 1991. "Government Revenue from Financial Repression," NBER Working Papers 3604, National Bureau of Economic Research, Inc.
  36. Giovannini, Alberto & Park, Jae Won, 1992. "Capital controls and international trade finance," Journal of International Economics, Elsevier, vol. 33(3-4), pages 285-304, November.
  37. Maurice Obstfeld, 1986. "How Integrated are World Capital Markets? Some New Tests," NBER Working Papers 2075, National Bureau of Economic Research, Inc.
  38. Alesina, Alberto & Summers, Lawrence H, 1993. "Central Bank Independence and Macroeconomic Performance: Some Comparative Evidence," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 25(2), pages 151-62, May.
  39. Brock, Philip L., 1984. "Inflationary finance in an open economy," Journal of Monetary Economics, Elsevier, vol. 14(1), pages 37-53, July.
  40. Sussman, Oren, 1991. "Macroeconomic Effects of a Tax on Bond Interest Rates," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 23(3), pages 352-66, August.
  41. Lane, Timothy & Rojas-Suarez, Liliana, 1992. "Credibility, capital controls, and the EMS," Journal of International Economics, Elsevier, vol. 32(3-4), pages 321-337, May.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:793. 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: ()

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.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.