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Discussion Paper Details

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Title: Can Short-Term Capital Controls Promote Capital Inflows

Author(s): Tito Cordella

Publication Date: November 1998

Keyword(s): bank runs, Capital Controls, Capital Inflows and Herd Behaviour

Programme Area(s): Financial Economics and International Macroeconomics

Abstract: 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.

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Bibliographic Reference

Cordella, T. 1998. 'Can Short-Term Capital Controls Promote Capital Inflows'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=2011