Is Optimal Capital Control Policy Countercyclical in Open Economy Models with Collateral Constraints?

30 Pages Posted: 1 Aug 2018

See all articles by Stephanie Schmitt-Grohé

Stephanie Schmitt-Grohé

Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Martín Uribe

Columbia University - Graduate School of Arts and Sciences - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: July 2017

Abstract

This paper contributes to a literature that studies optimal capital control policy in open economy models with pecuniary externalities due to flow collateral constraints. It shows that the optimal policy calls for capital controls to be lowered during booms and to be increased during recessions. These findings are at odds with the conventional view that capital controls should be tightened during expansions to curb capital inflows and relaxed during contractions to discourage capital flight.

Suggested Citation

Schmitt-Grohe, Stephanie and Uribe, Martin, Is Optimal Capital Control Policy Countercyclical in Open Economy Models with Collateral Constraints? (July 2017). IMF Economic Review, Vol. 65, Issue 3, 2017, Available at SSRN: https://ssrn.com/abstract=3224362 or http://dx.doi.org/10.1057/s41308-017-0032-6

Stephanie Schmitt-Grohe (Contact Author)

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Martin Uribe

Columbia University - Graduate School of Arts and Sciences - Department of Economics ( email )

420 W. 118th Street
1022 International Affairs Building, MC 3308
New York, NY 10027
United States
212-851-4008 (Phone)
212-854-8059 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
1
Abstract Views
97
PlumX Metrics