Exchange Controls, Capital Controls, and International Financial Markets

Alan Stockman and Alejandro Hernandez D.

No 1755, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper examines the effects of restrictions on international financial markets. We analyze a general equilibrium, rational expectations model of a two-country world in which well-functioning international financial markets premit trade in all state-contingent securities except insofar as governments restrict these markets. The restrictions we examine take the form of taxes or quantitative controls on purchases of foreign currency and on the income from foreign assets. State-contingent financial markets allow households to allocate wealth optimally across states so that the imposition of exchange and capital controls has, roughly speaking, only substitution effects but no wealth effect. These restrictions reduce international trade in goods and lower ex-post welfare in the country in which they are imposed. Nominal prices and exchange rate are nonmonotonic functions of these restrictions.

Date: 1985-10
Note: ITI IFM
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Published as The American Economic Review, Vol. 78, No. 3, pp. 362-374, (June 1988).

Downloads: (external link)
http://www.nber.org/papers/w1755.pdf (application/pdf)

Related works:
Journal Article: Exchange Controls, Capital Controls, and International Financial Markets (1988)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:1755

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w1755

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().