Australia's experience with the variable deposit requirement

Australian Treasury
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Australian Treasury: Treasury, Government of Australia

Economic Roundup, 1999, issue 3, 45-56

Abstract: This article examines the implementation of the Variable Deposit Requirement (VDR) capital control scheme in Australia in the 1970s. It notes that while capital controls can play a role in certain circumstances, they should not be used as a substitute for addressing underlying policy needs or financial sector reforms of an economy. The scheme was short-term in nature, and depended on subjective judgements about what level of capital inflow was appropriate at the time, and was unrelated to long-term policy objectives. The VDR was superseded by the adoption of a flexible exchange rate which allowed monetary policy to operate with greater coherence and independence from other objectives, such as industry policies.

Keywords: capital; foreign exchange; financial markets (search for similar items in EconPapers)
JEL-codes: E22 E52 F31 G10 (search for similar items in EconPapers)
Date: 1999
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