Can Short-Term Capital Controls Promote Capital Inflows?

Author/Editor:

Tito Cordella

Publication Date:

September 1, 1998

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

In an economy à la Diamond and Dybvig (1983), we present an example in which foreign lenders find it profitable to invest in an emerging market if, and only if, the emerging market government imposes taxes on short-term capital inflows. This implies that capital controls that are effective in reducing the vulnerability of emerging markets to financial crises may increase the volume of capital inflows.

Series:

Working Paper No. 1998/131

Subject:

Balance of payments Capital controls Capital flows Capital inflows Emerging and frontier financial markets Financial crises Financial markets

English

Publication Date:

September 1, 1998

ISBN/ISSN:

9781451855258/1018-5941

Stock No:

WPIEA1311998

Pages:

10

Please address any questions about this title to publications@imf.org