Citation

Discussion Paper Details

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Title: Capital Controls and International Trade Finance

Author(s): Alberto Giovannini and Jae Won Park

Publication Date: November 1989

Keyword(s): Asset Markets, Capital Controls, Financial Markets and Foreign Assets

Programme Area(s): Applied Macroeconomics and International Macroeconomics

Abstract: This paper studies the effects of prohibiting individuals from holding foreign assets, and of allowing firms to trade in foreign assets only up to what is needed to finance export and import activities. Although firms can perform arbitrage between domestic and foreign financial markets, this arbitrage does not eliminate the distortions in asset markets; instead, the distortions are transmitted to the domestic goods market. The paper discusses the effects of shocks in foreign financial markets and in domestic fiscal policy. We show that both the dynamics and steady states are crucially affected by capital controls.

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Bibliographic Reference

Giovannini, A and Park, J. 1989. 'Capital Controls and International Trade Finance'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=343