The Effects of Capital Controls on Exchange Rate Volatility and Output |
|
Author:
| Nickel, Christiane Schmidt, Gnter Stadtmann, Georg Frenkel, Michael |
Series title: | IMF Working Papers |
ISBN: | 978-1-4519-0487-1 |
Publication Date: | Nov 2001 |
Publisher: | International Monetary Fund
|
Book Format: | Ebook |
List Price: | Contact Supplier contact
|
Book Description:
|
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 rates following a monetary shock. On the other hand, the implementation increases exchange rate volatility in the short run and induces costs for the real sector in the form of...
More DescriptionThis 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 rates following a monetary shock. On the other hand, the implementation increases exchange rate volatility in the short run and induces costs for the real sector in the form of lower equilibrium output levels.