Great Depression recovery: The role of capital controls

Kris James Mitchener , Kirsten Wandschneider, 18 August 2014

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The use of capital controls as a policy tool – especially as a stopgap to ward off financial crises – is controversial. For example, in 1998, Malaysia was castigated by policymakers and financial markets for imposing capital controls in response to the East Asian financial crisis.

Topics: Economic history, Exchange rates, International finance, Monetary policy
Tags: capital controls, East Asian financial crisis, exchange rates, financial crises, gold standard, Great Depression

Do capital controls deflect capital flows?

Paolo Giordani, Michele Ruta, Hans Weisfeld, Ling Zhu, 23 June 2014

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The size and volatility of capital flows to developing countries have increased significantly in recent years (Figure 1), leading many economists to argue that national policies and multilateral institutions are needed to govern these flows (Forbes and Klein 2013, Blanchard and Ostry 2012).

Topics: International finance
Tags: Brazil, capital controls, capital flows, Capital inflows, China, international capital flows, South Africa, spillovers

Capital controls in the 21st century

Barry Eichengreen, Andrew K Rose, 5 June 2014

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Capital controls are back. The IMF (2012) has softened its earlier opposition to their use. Some emerging markets – Brazil, for example – have made renewed use of controls since the global financial crisis of 2008–2009.

Topics: International finance
Tags: capital, capital controls, capital flows, global financial crisis, IMF, Macroprudential policy

For a few dollars more: Reserves and growth in times of crises

Matthieu Bussière, Gong Cheng, Menzie D. Chinn , Noëmie Lisack, 16 March 2014

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In the decade preceding the 2008 global financial crisis (GFC), emerging market economies accumulated large stocks of international reserves (see Figure 1). The unprecedented pace of reserve accumulation was at least partly a response to the lessons drawn from previous financial crises, which predominantly affected emerging markets.

Topics: International finance
Tags: capital controls, financial crises, international reserves

Policymaking in crises: Pick your poison

Kristin Forbes, Michael W Klein, 24 December 2013

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In 2010, the Brazilian finance minister Guido Mantenga declared a ‘currency war’ because of the harmful effects of the strengthening of the real. He blamed the currency’s appreciation on easy money in advanced countries, and to a lesser extent on reserve accumulation in some emerging markets.

Topics: Exchange rates, Macroeconomic policy
Tags: Brazil, capital controls, currency war, exchange rates, foreign exchange reserves, global financial crisis, India, Indonesia

Tapering talk: The impact of expectations of reduced Federal Reserve security purchases on emerging markets

Barry Eichengreen, Poonam Gupta, 19 December 2013

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In May 2013, Federal Reserve officials first began to talk of the possibility of the US central bank tapering its securities purchases from $85 billion a month to something lower. A milestone to which many observers point is 22 May 2013, when Chairman Bernanke raised the possibility of tapering in his testimony to Congress.

Topics: Exchange rates, Monetary policy
Tags: capital controls, Capital inflows, currency war, emerging markets, exchange rates, Federal Reserve, Macroprudential policies, monetary policy, tapering

Capital controls and the resolution of failed cross-border banks: The case of Iceland

Friðrik Már Baldursson, Richard Portes, 12 November 2013

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A large amount of carry trade was drawn to Iceland in the boom leading up to the crisis of early October 2008 (Danielsson and Arnason 2011, Baldursson and Portes 2013a). As pressure mounted on the Icelandic banks, investors increasingly chose to exit the krona, which depreciated by 25% during the week before the banks collapsed. As the banks went down, the krona depreciated even further.

Topics: Europe's nations and regions, Global crisis
Tags: capital controls, cross-border banks, Iceland

Independent monetary policies, synchronised outcomes

Espen Henriksen, Finn Kydland, Roman Šustek, 2 October 2013

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The recession in the Eurozone has given new life to optimal-currency-area thinking. The argument goes that the disadvantages of a single currency come from the loss of flexibility and ability to use monetary policy to respond to “asymmetric shocks” (Krugman and Obstfeld 2009).

Topics: Exchange rates, Monetary policy
Tags: capital controls, Central Banks, EMU, exchange-rate policy, inflation, monetary policy

Is there a dilemma with the Trilemma?

Michael W Klein, Jay C. Shambaugh , 27 September 2013

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In the Handbook of Safeguarding Global Financial Stability, the chapter “Capital Mobility and Exchange Rate Regimes” begins “Forced to state all the insights of international macroeconomics while standing on one leg, one could do worse than raise a foot off the ground and say something like:

Topics: Exchange rates, Monetary policy
Tags: capital controls, exchange-rate policy, global crisis, monetary policy

Dilemma not Trilemma: The global financial cycle and monetary policy independence

Hélène Rey, 31 August 2013

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Looking at the evolution of financial integration over the past half‐century in the world economy, one might conclude that financial openness is an irresistible long-run trend, hailed by policymakers and academic economists alike. Both emerging markets and advanced economies have increasingly opened their borders to financial flows.

Topics: International finance, Monetary policy
Tags: capital controls, Global financial cycle, macro-prudential policy, VIX

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