Pros and Cons of Capital Controls in the Presence of Incomplete Markets

American Economist, Vol. 49, No. 1, 79-93

Posted: 13 Apr 2014

See all articles by Alexei G. Orlov

Alexei G. Orlov

Securities and Exchange Commission

Date Written: Spring 2005

Abstract

This paper justifies the relevance of capital controls on the basis of markets' incompleteness, examines the pros and cons of restrictions on capital mobility, surveys the literature's recent attempts to assess the effectiveness of capital controls, and delineates the focal points of debate among researchers and policymakers. Additionally, the link between capital controls and financial stability is examined using frequency domain techniques. The study of the Chilean stock market and Peso-Dollar exchange rate fluctuations reveals that financial volatility due to irregular components increased after the removal of capital controls in September 1998.

Suggested Citation

Orlov, Alexei G., Pros and Cons of Capital Controls in the Presence of Incomplete Markets (Spring 2005). American Economist, Vol. 49, No. 1, 79-93, Available at SSRN: https://ssrn.com/abstract=2424398

Alexei G. Orlov (Contact Author)

Securities and Exchange Commission ( email )

100 F Street NE
Washington, DC 20549
United States

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