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Global Imbalances in a World of Inflexible Real Exchange Rates and Capital Controls

  • Hallett, Andrew Hughes

    (Asian Development Bank Institute)

  • Oliva, Juan Carlos Martinez

    (Asian Development Bank Institute)

This paper addresses the issue of international payments in a stock-flow framework, by capturing the interaction between the current account balance and international assets portfolios of domestic and foreign investors. It is argued that the stability of such interaction may be affected by shifts in the preferences of investors, by the relative rate of return of different assets, and—more in general—by institutional settings. The model is then used for policy analysis purposes to derive the conditions for the existence of dynamic equilibria, and if they can be attained, under the assumption of market-distorting policy choices.

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File URL: http://www.adbi.org/files/2011.12.07.wp330.global.imbalances.inflexible.exchange.rates.capital.pdf
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Paper provided by Asian Development Bank Institute in its series ADBI Working Papers with number 330.

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Length: 28 pages
Date of creation: 08 Dec 2011
Date of revision:
Handle: RePEc:ris:adbiwp:0330
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  1. Atish R. Ghosh & Jun I. Kim & Enrique G. Mendoza & Jonathan D. Ostry & Mahvash S. Qureshi, 2011. "Fiscal Fatigue, Fiscal Space and Debt Sustainability in Advanced Economies," NBER Working Papers 16782, National Bureau of Economic Research, Inc.
  2. Obstfeld, Maurice, 2004. "External Adjustment," Center for International and Development Economics Research, Working Paper Series qt7bw468wx, Center for International and Development Economics Research, Institute for Business and Economic Research, UC Berkeley.
  3. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
  4. Masson, Paul R., 1981. "Dynamic stability of portfolio balance models of the exchange rate," Journal of International Economics, Elsevier, vol. 11(4), pages 467-477, November.
  5. Andrew Hughes Hallett & Juan Martinez Oliva, 2012. "Reducing Global Imbalances: Can Fixed Exchange Rates and Current Account Limits Help?," Open Economies Review, Springer, vol. 23(1), pages 163-192, February.
  6. W. Max Corden, 2011. "Global Imbalances and the Paradox of Thrift," Melbourne Institute Working Paper Series wp2011n20, Melbourne Institute of Applied Economic and Social Research, The University of Melbourne.
  7. Andrew Hughes Hallett & Svend Jensen, 2011. "Stable and enforceable: a new fiscal framework for the Euro area," International Economics and Economic Policy, Springer, vol. 8(3), pages 225-245, September.
  8. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The revived Bretton Woods system," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 9(4), pages 307-313.
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