Anti-Inflationary Monetary Policy and the Capital Import Tax

Nissan Liviatan

The Warwick Economics Research Paper Series (TWERPS) from University of Warwick, Department of Economics

Abstract: Anti-inflationary monetary policy faces special problems under flexible exchange rate and free capital movements. While this policy might be quite effective in reducing inflation it is also likely to create changes in relative prices which can be undesirable. In particular the short run capital imports which are introduced by the restrictive policy may bias the deflationary effect towards the exchange rate and thus lead to its appreciation in real terms. While this phenomenon may be temporary it may cause cufficient concern in an export oriented economy.

Pages: 24 pages
Date: 1980
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Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:wrk:warwec:171

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