Are capital controls in the foreign exchange market effective?
Straetmans, S.T.M. and Versteeg, Roald J. and Wolff, C.C.P. (2013) Are capital controls in the foreign exchange market effective? Journal of International Money & Finance 35 , pp. 36-53. ISSN 0261-5606.
Abstract
One of the reasons for governments to employ capital controls is to obtain some degree of monetary independence. In this paper we test whether capital controls can reduce the link between exchange rates fluctuations and cross border interest differentials. Recent capital control proxies are used in order to determine the date of capital account liberalization for a panel of Western European and emerging countries. Results show that capital controls have a very limited effect on observed deviations from interest parities, even when accounting for the political risk associated with capital controls.
Metadata
| Item Type: | Article |
|---|---|
| Keyword(s) / Subject(s): | Capital controls, Exchange Rates, Interest differentials, Forward premia, Monetary freedom, Political Risk |
| School: | Birkbeck Faculties and Schools > Faculty of Business and Law > Birkbeck Business School |
| Depositing User: | Administrator |
| Date Deposited: | 11 Feb 2013 10:07 |
| Last Modified: | 02 Aug 2023 17:02 |
| URI: | https://eprints.bbk.ac.uk/id/eprint/6143 |
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