The Economics of Offshore Financial Services and the Choice of Tax, Currency, and Exchange-Rate Regimes

38 Pages Posted: 23 Aug 2006

Date Written: August 1, 2006

Abstract

Open-economy macroeconomists regularly invoke the policy trilemma that states that governments cannot simultaneously maintain an open capital account, a fixed exchange rate, and a domestically-oriented monetary policy. My thesis is that jurisdictions with substantial offshore activities find these and other macroeconomic choices significantly affected by something else: Concern for the continued health and development of their international financial business. Monetary, exchange-rate, and tax policies and the choice of domestic currency all will be impacted by this concern. The different choices made by (1) Denmark and Malta in ERM II, (2) offshore financial centers in Europe, and (3) financial centers in East Asia are considered to develop some general conclusions.

Keywords: Offshore financial centers, international financial services, exchange-rate regime, taxation of nonresidents, currency substitution

JEL Classification: F31, F33, F36, F53, G10

Suggested Citation

von Furstenberg, George M., The Economics of Offshore Financial Services and the Choice of Tax, Currency, and Exchange-Rate Regimes (August 1, 2006). Available at SSRN: https://ssrn.com/abstract=925885 or http://dx.doi.org/10.2139/ssrn.925885

George M. Von Furstenberg (Contact Author)

Indiana University ( email )

Department of Economics
Wylie Hall, Indiana University
Bloomington, IN 47405-6620
United States
812-856-1382 (Phone)
812-855-3736 (Fax)

HOME PAGE: http://mypage.iu.edu/~vonfurst/

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