IMF Working Papers

Capital Mobility and Exchange Market Intervention in Developing Countries

By Liliana Rojas-Suárez, Donald J Mathieson, Michael P. Dooley

November 1, 1996

Preview Citation

Format: Chicago

Liliana Rojas-Suárez, Donald J Mathieson, and Michael P. Dooley Capital Mobility and Exchange Market Intervention in Developing Countries, (USA: International Monetary Fund, 1996) accessed September 20, 2024
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

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.

Subject: Balance of payments, Capital controls, Capital flows, Currencies, Financial services, Interest rate parity, Monetary base, Money

Keywords: Capital controls, Capital flow, Capital flows, Currencies, Exchange market intervention, Holding, Interest rate parity, Intervention activity, Intervention function, Market-clearing interest rates, Monetary base, WP

Publication Details

  • Pages:

    46

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1996/131

  • Stock No:

    WPIEA1311996

  • ISBN:

    9781451855234

  • ISSN:

    1018-5941

You May Also Be Interested In...

Systemic Implications of Financial Inclusion

September 20, 2024

Zimbabwe: Technical Assistance Report-Financial Sector Stability Report Follow Up Technical Assistance on the Implementation of the Basel III Liquidity Framework

September 20, 2024

Central Bank Digital Currency Adoption: Inclusive Strategies for Intermediaries and Users

September 20, 2024

Norway: 2024 Article IV Consultation-Press Release; Staff Report; and Statement by the Executive Director for Norway

September 18, 2024