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The Effects of Capital Controls on Exchange Rate Volatility and Output

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 volatilit...

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Bibliographic Details
Main Author: Nickel, Christiane
Other Authors: Schmidt, Günter, Stadtmann, Georg, Frenkel, Michael
Format: eBook
Language:English
Published: Washington, D.C. International Monetary Fund 2001
Series:IMF Working Papers
Subjects:
Short-term Capital Movements
Currency; Foreign Exchange
Current Account Adjustment
Balance Of Payments
Exchange Rate Adjustments
Long-term Capital Movements
Open Economy Macroeconomics
Exports And Imports
International Economics
Capital Flows
Foreign Exchange
Capital Inflows
Capital Controls
Capital Movements
Exchange Rates
International Investment
Malaysia
Online Access:
Collection: International Monetary Fund - Collection details see MPG.ReNa
Description
Summary: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 lower equilibrium output levels
Physical Description:30 pages
ISBN:9781451859515

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