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The consensus view is that capital controls can effectively lengthen the maturity composition of capital inflows and increase the independence of monetary policy but are not generally effective at reducing net inflows and influencing the real exchange rate. This paper presents empirical evidence...
Persistent link: https://www.econbiz.de/10010484105
The adoption of the Tobin tax would be an important political act, a break both with the neo-liberal practices which accompany economic globalisation, and with the fatalism which goes along with them. This idea assumes that the level of co-operation which exists between the nations of the world...
Persistent link: https://www.econbiz.de/10013230306
Persistent link: https://www.econbiz.de/10001699358
Restrictions on international capital transactions and other payments are usually designed to limit volatile short-term capital flows ( hot money ) and stabilize the exchange rate. Their imposition, however, may have the opposite effect by inadvertently signaling the continuation of...
Persistent link: https://www.econbiz.de/10011536657
This paper characterizes jointly optimal default and exchange-rate policy in a small open economy with limited enforcement of debt contracts and downward nominal wage rigidity. Under optimal policy, default occurs during contractions and is accompanied by large devaluations. The latter inflate...
Persistent link: https://www.econbiz.de/10013024385
During a crisis, developing countries regret having issued dollar denominated debt because they have to pay more when they have less. Ex ante, however, they may be worse off issuing local currency debt because the equilibrium interest rate might rise, making it more expensive for them to borrow....
Persistent link: https://www.econbiz.de/10014072621
Persistent link: https://www.econbiz.de/10001519943
Capital controls lower the variability of the exchange rate and reduce the risk premium as well as the domestic interest rate. On the other hand, capital controls reduce the number of noise traders and, therefore, the risk-bearing capacity of the market, leading to higher interest rates and a...
Persistent link: https://www.econbiz.de/10010503713
While there is still much disagreement on the causes underlying recent emerging markets' crises, one factor that most observers have agreed upon is that contracting "dollar" (foreign currency) denominated external debt - as opposed to domestic currency debt - created balance sheet mismatches...
Persistent link: https://www.econbiz.de/10014151417
We propose that the limited financial development of emerging markets is a significant factor behind the large share of dollar-denominated external debt present in these markets. We show that when financial constraints affect borrowing and lending between domestic agents, agents undervalue...
Persistent link: https://www.econbiz.de/10014118569