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The Effects of Capital Controls on Exchange Rate Volatility and Output
Author: Michael Frenkel
Publisher: INTERNATIONAL MONETARY FUND
Published: 2001-11-01
Total Pages: 30
ISBN-13: 9781451859515
DOWNLOAD EBOOK →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.
Capital Controls, Exchange Rates, and Monetary Policy in the World Economy
Author: Sebastian Edwards
Publisher: Cambridge University Press
Published: 1997-06-13
Total Pages: 452
ISBN-13: 9780521597111
DOWNLOAD EBOOK →The essays collected in this volume discuss the impact of increased capital mobility on macroeconomic performance.
Capital Controls and Capital Flows in Emerging Economies
Author: Sebastian Edwards
Publisher: University of Chicago Press
Published: 2009-02-15
Total Pages: 699
ISBN-13: 0226184994
DOWNLOAD EBOOK →Some scholars argue that the free movement of capital across borders enhances welfare; others claim it represents a clear peril, especially for emerging nations. In Capital Controls and Capital Flows in Emerging Economies, an esteemed group of contributors examines both the advantages and the pitfalls of restricting capital mobility in these emerging nations. In the aftermath of the East Asian currency crises of 1997, the authors consider mechanisms that eight countries have used to control capital inflows and evaluate their effectiveness in altering the maturity of the resulting external debt and reducing macroeconomic vulnerability. This volume is essential reading for all those interested in emerging nations and the costs and benefits of restricting international capital flows.
Preemptive Policies and Risk-Off Shocks in Emerging Markets
Author: Ms. Mitali Das
Publisher: International Monetary Fund
Published: 2022-01-07
Total Pages: 54
ISBN-13: 1616358343
DOWNLOAD EBOOK →We show that “preemptive” capital flow management measures (CFM) can reduce emerging markets and developing countries’ (EMDE) external finance premia during risk-off shocks, especially for vulnerable countries. Using a panel dataset of 56 EMDEs during 1996–2020 at monthly frequency, we document that countries with preemptive policies in place during the five year window before risk-off shocks experienced relatively lower external finance premia and exchange rate volatility during the shock compared to countries which did not have such preemptive policies in place. We use the episodes of Taper Tantrum and COVID-19 as risk-off shocks. Our identification relies on a difference-in-differences methodology with country fixed effects where preemptive policies are ex-ante by construction and cannot be put in place as a response to the shock ex-post. We control the effects of other policies, such as monetary policy, foreign exchange interventions (FXI), easing of inflow CFMs and tightening of outflow CFMs that are used in response to the risk-off shocks. By reducing the impact of risk-off shocks on countries’ funding costs and exchange rate volatility, preemptive policies enable countries’ continued access to international capital markets during troubled times.
Exchange Rate Volatility in Integrating Capital Markets
Author: Giancarlo Corsetti
Publisher:
Published: 1990
Total Pages: 52
ISBN-13:
DOWNLOAD EBOOK →This paper investigates the relationship between international capital liberalization and exchange rate volatility. While the effects of a capital controls liberalization on the transaction volume in the foreign exchange market are theoretically unambiguous, the effects on the volatility of exchange rate can have either sign. On one hand, the liberalization leads to increasing economy-wide and investor-specific uncertainty. On the other hand, the augiented number of participants in the market should reduce exchange rate fluctuations. The uncertainty effects should be dominant in the short run, while the increase in the number of traders in the longer run should make the market thicker and tend to reduce volatility. It is shown that, for a sample of countries which have liberalized capital controls in the last 15 years, structural breaks in the process generating exchange rate volatility have occurred very close to the time when liberalization measures were implemented. The results also suggest an increase in volatility after the structural breakpoint.
Market Volatility and Foreign Exchange Intervention in EMEs
Author: Banco de Pagos Internacionales (Basilea, Suiza). Departamento Monetario y Económico
Publisher:
Published: 2013
Total Pages: 0
ISBN-13: 9789291319626
DOWNLOAD EBOOK →The Effects of Real Exchange Rate Volatility on Sectoral Investment
Author: Bahar Erdal
Publisher: Routledge
Published: 2017-05-18
Total Pages: 172
ISBN-13: 1351801724
DOWNLOAD EBOOK →Originally published in 1997. This study investigates what the effects of real exchange rate volatility are on sectorial investment in the fixed and flexible exchange rate systems. It lays out the results of research into the effects of the levels and volatility of real exchange rates on investment in the manufacturing sectors of the countries in the European Monetary System as well as of the countries in the flexible exchange rate system, with data from between 1973 and 1993. Examining the differences between the two systems in the results this book also looks at exchange rate effects on interest rates at the time.
Are Capital Controls Effective in the 21st Century? The Recent Experience of Colombia
Author: Herman Kamil
Publisher: INTERNATIONAL MONETARY FUND
Published: 2009-02-01
Total Pages: 25
ISBN-13: 9781451871777
DOWNLOAD EBOOK →This paper assesses the effects of capital controls imposed in Colombia in 2007 on capital flows and exchange rate dynamics. The results suggest that the controls were successful in reducing external borrowing, but had no statistically significant impact on the volume of non- FDI flows as a whole. We find no evidence that restrictions to capital mobility moderated the appreciation of Colombia's currency, or increased the degree of independence of monetary policy. We also find that controls have significantly increased the volatility of the exchange rate. Additional research is needed to assess the effects of capital controls on financial stability.
Unveiling the Effects of Foreign Exchange Intervention
Author: Gustavo Adler
Publisher: International Monetary Fund
Published: 2015-06-23
Total Pages: 42
ISBN-13: 1513534602
DOWNLOAD EBOOK →We study the effect of foreign exchange intervention on the exchange rate relying on an instrumental-variables panel approach. We find robust evidence that intervention affects the level of the exchange rate in an economically meaningful way. A purchase of foreign currency of 1 percentage point of GDP causes a depreciation of the nominal and real exchange rates in the ranges of [1.7-2.0] percent and [1.4-1.7] percent respectively. The effects are found to be quite persistent. The paper also explores possible asymmetric effects, and whether effectiveness depends on the depth of domestic financial markets.
