Capital Account Liberalization as a Signal

39 Pages Posted: 16 May 2000 Last revised: 4 Oct 2010

See all articles by Leonardo Bartolini

Leonardo Bartolini

Deceased

Allan Drazen

University of Maryland - Department of Economics; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Date Written: August 1996

Abstract

We present a model in which a government's current capital controls policy signals future policies. Controls on capital outflows evolve in response to news on technology, conditional on government attitudes towards taxation of capital. When there is uncertainty over government types, a policy of liberal capital outflows sends a favorable signal that may trigger a capital inflow. This prediction is consistent with the experience of several countries that have liberalized their capital account

Suggested Citation

Bartolini (deceased), Leonardo and Drazen, Allan, Capital Account Liberalization as a Signal (August 1996). NBER Working Paper No. w5725. Available at SSRN: https://ssrn.com/abstract=76829

Allan Drazen (Contact Author)

University of Maryland - Department of Economics ( email )

College Park, MD 20742-1815
United States
301-405-3477 (Phone)
301-405-7835 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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