Cover IMF Working Papers
Capital Controls and Trade Liberalization in a Monetary Economy
Author:
Mr. B. Jang
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Series:
IMF Working Papers
Volume/Issue:
Volume 1999: Issue 024
Language:
English
Publication Date:
01 Mar 1999
DOI:
https://doi.org/10.5089/9781451844122.001
ISBN:
9781451844122
ISSN:
1018-5941
Pages:
24
Keywords:
WP; current account; Capital Controls; Trade Liberalization; liberalization policy; capital mobility; money balance; current account adjustment; Exchange rates; Consumption; Demand for money
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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This paper reexamines Aizenman’s (1985) results on the effects of capital controls during unanticipated trade liberalization using an intertemporal optimizing monetary model. Unlike in Aizenman’s model, which is based on the currency substitution model, foreign money is an interest-bearing asset in this paper, and its major role is to smooth intertemporal consumption. With this modification, Aizenman’s results are reversed, thus showing that the effects of capital controls during trade liberalization would vary greatly depending on the role of foreign money in a country. The effects of an anticipated trade liberalization are also studied.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 1999: Issue 024