Contagious Policies: An Analysis of Spatial Interactions Among Countries' Capital Account Policies

24 Pages Posted: 19 Jul 2010

See all articles by Andreas Steiner

Andreas Steiner

University of Osnabrueck, Institute of Empirical Economic Research

Abstract

Countries' capital account policies might be contagious in the sense that domestic policies are driven by other countries' policies. A model of strategic interactions is developed to show that countries' best response to policy changes elsewhere consists in imitating this policy. Using a spatial econometric model, the hypothesis of policy interactions is tested in a large panel data set. The evidence shows that capital account policies are contemporaneously correlated across countries. Concerning fundamentals, the move to a fixed exchange rate regime and an increase in real world interest rates are correlated with the imposition of capital account restrictions.

Suggested Citation

Steiner, Andreas, Contagious Policies: An Analysis of Spatial Interactions Among Countries' Capital Account Policies. Pacific Economic Review, Vol. 15, No. 3, pp. 422-445, August 2010. Available at SSRN: https://ssrn.com/abstract=1643556 or http://dx.doi.org/10.1111/j.1468-0106.2010.00511.x

Andreas Steiner (Contact Author)

University of Osnabrueck, Institute of Empirical Economic Research ( email )

Rolandstrasse 8
Osnabrück, D-49069
Germany

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