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Capital Mobility and Exchange Market Intervention in Developing Countries
Author:
Ms. Liliana Rojas-Suárez null

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Mr. Donald J Mathieson
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Mr. Michael P. Dooley null

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Series:
IMF Working Papers
Volume/Issue:
Volume 1996: Issue 131
Language:
English
Publication Date:
01 Nov 1996
DOI:
https://doi.org/10.5089/9781451855234.001
ISBN:
9781451855234
ISSN:
1018-5941
Pages:
46
Keywords:
WP; holding; capital flow; intervention function; exchange market intervention; intervention activity; market-clearing interest rates; Capital flows; Monetary base; Capital controls; Interest rate parity; Currencies
Legal-disclaimer:
IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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Official controls on interest rates and capital flows rule out the use of traditional interest rate parity conditions to measure changes in the degree of capital mobility confronting developing countries. This paper develops an alternative technique for measuring the cost of undertaking disguised capital flows when such official controls are present. This measure is derived from an intertemporal, optimizing model of an open economy incorporating the influence of the authorities’ foreign exchange market activities. The paper suggests that the real cost of undertaking disguised capital flows declined on average by nearly 70 percent between the early 1970s and the late 1980s.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund