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Can Short-Term Capital Controls Promote Capital Inflows?
Author:
Mr. Tito Cordella
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Series:
IMF Working Papers
Volume/Issue:
Volume 1998: Issue 131
Language:
English
Publication Date:
01 Sep 1998
DOI:
https://doi.org/10.5089/9781451855258.001
ISBN:
9781451855258
ISSN:
1018-5941
Pages:
10
Keywords:
WP; investor; capital control; investors point of view; capital controls; capital inflows; bank runs; herd behavior; emerging market government; long-run return; emerging market to financial crises; financial crisis in Southeast Asia; expected returns of investor; investors' return; Emerging and frontier financial markets; Capital flows; Southeast Asia
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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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In an economy à la Diamond and Dybvig (1983), we present an example in which foreign lenders find it profitable to invest in an emerging market if, and only if, the emerging market government imposes taxes on short-term capital inflows. This implies that capital controls that are effective in reducing the vulnerability of emerging markets to financial crises may increase the volume of capital inflows.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund