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Contagious Policies: An Analysis of Spatial Interactions Among Countries’ Capital Account Policies

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Abstract

Countries’ capital account policies might be contagious in the sense that domestic policies are driven by other countries’ policies. A model of strategic interactions is developed to show that countries’ best response to policy changes elsewhere consists in imitating this policy. Using a spatial econometric model, the hypothesis of policy interactions is tested in a large panel data set. The evidence shows that capital account policies are contemporaneously correlated across countries. Concerning fundamentals, the move to a fixed exchange rate regime and an increase in real world interest rates are correlated with the imposition of capital account restrictions.

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  • Andreas Steiner, 2010. "Contagious Policies: An Analysis of Spatial Interactions Among Countries’ Capital Account Policies," Working Papers 80, Institute of Empirical Economic Research, Osnabrueck University.
  • Handle: RePEc:iee:wpaper:wp0080
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    Cited by:

    1. Cassette, Aurélie & Creel, Jérôme & Farvaque, Etienne & Paty, Sonia, 2013. "Governments under influence: Country interactions in discretionary fiscal policy," Economic Modelling, Elsevier, vol. 30(C), pages 79-89.
    2. Bicaba, Zorobabel T. & Coricelli, Fabrizio, 2015. "Learning to open up: Capital account liberalizations in the post-Bretton Woods era," CEPR Discussion Papers 10389, C.E.P.R. Discussion Papers.

    More about this item

    Keywords

    Capital Controls; Strategic Interaction; Panel Data Analysis;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F3 - International Economics - - International Finance
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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