Capital Mobility and Exchange Market Intervention in Developing Countries

Author/Editor:

Liliana Rojas-Suárez ; Donald J Mathieson ; Michael P. Dooley

Publication Date:

November 1, 1996

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.

Series:

Working Paper No. 96/131

English

Publication Date:

November 1, 1996

ISBN/ISSN:

9781451855234/1018-5941

Stock No:

WPIEA1311996

Format:

Paper

Pages:

46

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