Currency Wars, Coordination, and Capital Controls

22 Pages Posted: 13 Jul 2016

See all articles by Olivier J. Blanchard

Olivier J. Blanchard

National Bureau of Economic Research (NBER); Peter G. Peterson Institute for International Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 2016

Abstract

The strong monetary policy actions undertaken by advanced economies' central banks have led to complaints of "currency wars" by some emerging-market economies and to widespread demands for more macroeconomic policy coordination. This paper reviews cross-border effects of advanced economies' monetary policies on emerging economies, through goods markets, foreign exchange markets, and financial markets, and examines the scope for coordination. Blanchard concludes that, while advanced economies' monetary policies indeed have had substantial spillover effects on emerging-market economies, there was and still is little room for coordination. He argues that, given the limits on fiscal policy, restrictions on capital flows (i.e., capital controls) were and still are the appropriate macroeconomic instrument to advance the objectives of both macro and financial stability.

Keywords: Exchange Rates, Capital Controls, Capital Flows, Monetary Policy, Macroeconomic Policy Coordination

JEL Classification: F3, F36, F42

Suggested Citation

Blanchard, Olivier J., Currency Wars, Coordination, and Capital Controls (July 2016). Peterson Institute for International Economics Working Paper No. 16-9. Available at SSRN: https://ssrn.com/abstract=2808693 or http://dx.doi.org/10.2139/ssrn.2808693

Olivier J. Blanchard (Contact Author)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Peter G. Peterson Institute for International Economics ( email )

1750 Massachusetts Avenue, NW
Washington, DC 20036
United States

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