Capital Controls and Exchange Rate Regimes: An Empirical Investigation

38 Pages Posted: 1 May 2001

See all articles by Helge Berger

Helge Berger

Free University Berlin - Department of Economics; CESifo (Center for Economic Studies and Ifo Institute for Economic Research)

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich; CESifo (Center for Economic Studies and Ifo Institute)

Jakob de Haan

University of Groningen - Faculty of Economics and Business; De Nederlandsche Bank; CESifo (Center for Economic Studies and Ifo Institute)

Date Written: March 2001

Abstract

It is often argued that deregulation of international transactions and its effects on the "globalization" of financial markets is behind the decline in the attractiveness of fixed exchange rate regimes. We argue that, instead, much of the recently observed decrease in the level of capital controls should be seen as endogenous to the exchange rate regime decision. We find that the durability of a peg (measured on the basis of the growth of international reserves), the political benefits of a commitment to a peg, domestic and foreign inflation (aversion), as well as business cycle volatility and synchronization are the main determinants of capital controls. The empirical analysis is based on data for 53 non-OECD countries covering the period 1980-94.

Keywords: Monetary Policy, Exchange Rates, Capital Controls

JEL Classification: E42, E52, F32, F41

Suggested Citation

Berger, Helge and Sturm, Jan-Egbert and de Haan, Jakob, Capital Controls and Exchange Rate Regimes: An Empirical Investigation (March 2001). CESifo Working Paper Series No. 433. Available at SSRN: https://ssrn.com/abstract=267833

Helge Berger (Contact Author)

Free University Berlin - Department of Economics ( email )

Boltzmannstr. 20
Berlin 14195, 14195
Germany
+49 30 838-54037 (Phone)
+49 30 838-52782 (Fax)

HOME PAGE: http://www.wiwiss.fu-berlin.de/berger/eng_index.htm

CESifo (Center for Economic Studies and Ifo Institute for Economic Research) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany
+49 89 9224 1266 (Phone)
+49 89 9224 1409 (Fax)

HOME PAGE: http://www.CESifo.de

Jan-Egbert Sturm

KOF Swiss Economic Institute, ETH Zurich ( email )

Zurich
Switzerland

HOME PAGE: http://www.kof.ethz.ch

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, 81679
Germany

HOME PAGE: http://www.cesifo.de

Jakob de Haan

University of Groningen - Faculty of Economics and Business ( email )

PO Box 800
Groningen, 9700 AV
Netherlands
+31 0 50 3633706 (Fax)

De Nederlandsche Bank ( email )

P.O. Box 98
Amsterdam, 1000 AB
Netherlands

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

HOME PAGE: http://www.CESifo.de

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