Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach

Olivier Jeanne and Anton Korinek

No 15927, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: This paper analyzes prudential controls on capital flows to emerging markets from the perspective of a Pigouvian tax that addresses externalities associated with the deleveraging cycle. It presents a model in which restricting capital inflows during boom times reduces the potential outflows during busts. This mitigates the feedback effects of deleveraging episodes, when tightening financial constraints on borrowers and collapsing prices for collateral assets have mutually reinforcing effects. In our model, capital controls reduce macroeconomic volatility and increase standard measures of consumer welfare.

JEL-codes: F3 F32 F34 G01 G15 G18 H21 (search for similar items in EconPapers)
Date: 2010-04
Note: IFM ME EFG
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Citations: View citations in EconPapers (247)

Published as Olivier Jeanne & Anton Korinek, 2010. "Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach," American Economic Review, American Economic Association, vol. 100(2), pages 403-07, May.

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Related works:
Journal Article: Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach (2010)
Working Paper: Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach (2010)
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