The New Economics of Capital Controls Imposed for Prudential Reasons+L4888

Author/Editor:

Anton Korinek

Publication Date:

December 1, 2011

Electronic Access:

Free Full Text (PDF file size is 926 KB).Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

This paper provides an introduction to the new economics of prudential capital controls in emerging economies. This literature is based on the notion that there are externalities associated with financial crises because individual market participants do not internalize their contribution to aggregate financial instability when they make their finacing decisions. As a result they impose externalities in the form of greater financial instability on each other, and the private financing decisions of individuals are distorted towards excessive risk-taking. We discuss how prudential capital controls can induce private agents to internalize these externalities and thereby increase macroeconomic stability and enhance welfare.

Series:

Working Paper No. 11/298

English

Publication Date:

December 1, 2011

ISBN/ISSN:

9781463927844/1018-5941

Stock No:

WPIEA2011298

Price:

$18.00 (Academic Rate:$18.00)

Format:

Paper

Pages:

38

Please address any questions about this title to publications@imf.org