Terms of Trade Disturbances, Real Exchange Rates and Welfare: the Role of Capital Controls and Labor Market Distortions
44 Pages Posted: 4 Jul 2004 Last revised: 12 Dec 2022
Date Written: March 1989
Abstract
Many arguments that have been advanced in favor of maintaining capital control within the EEC have not paid sufficient attention to the welfare consequences of this type of market intervention. Our paper provides a simple, optimizing framework in which the welfare consequences of capital controls can be assessed. Two main issues are considered. First, how do capital controls affect the adjustment of macroeconomic variables to real disturbances? Second, what is the nature of second best arguments for maintaining capital controls given that certain distortions will remain after the European single market is in place in 1992?
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Leading Indicators of Currency Crises
By Graciela Kaminsky, Saul Lizondo, ...
-
By Barry Eichengreen, Andrew Kenan Rose, ...
-
By Barry Eichengreen, Andrew Kenan Rose, ...
-
Financial Crises in Emerging Markets: The Lessons from 1995
By Jeffrey D. Sachs, Aaron Tornell, ...
-
A Rational Expectations Model of Financial Contagion
By Laura E. Kodres and Matt Pritsker
-
Financial Intermediaries and Markets
By Franklin Allen and Douglas M. Gale