IMF Working Papers

Can Short-Term Capital Controls Promote Capital Inflows?

By Tito Cordella

September 1, 1998

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Tito Cordella. Can Short-Term Capital Controls Promote Capital Inflows?, (USA: International Monetary Fund, 1998) accessed November 9, 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

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.

Subject: Balance of payments, Capital controls, Capital flows, Capital inflows, Emerging and frontier financial markets, Financial crises, Financial markets

Keywords: Bank runs, Capital control, Capital controls, Capital flows, Capital inflows, Emerging and frontier financial markets, Emerging market government, Emerging market to financial crises, Expected returns of investor, Financial crisis in Southeast Asia, Herd behavior, Investor, Investors point of view, Investors' return, Long-run return, Southeast Asia, WP

Publication Details

  • Pages:

    10

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 1998/131

  • Stock No:

    WPIEA1311998

  • ISBN:

    9781451855258

  • ISSN:

    1018-5941