Working Paper: NBER ID: w20951
Authors: Charles Engel
Abstract: The paper explicates the issues raised for macroprudential regulation in a global economy with high capital mobility. The study surveys the recent literature and aims to translate the academic rationale for such policies, in which market imperfections lead to external effects that require policy interventions. The new economics of capital controls is addressed, in which capital controls may be introduced to reduce financial market distortions or to help stabilize exchange rate movements in the face of other market distortions. The empirical literature on the effectiveness of such policies is surveyed.
Keywords: No keywords provided
JEL Codes: F33; F36; F42
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Market imperfections (D43) | External effects (F69) |
| External effects (F69) | Policy interventions (D78) |
| High capital mobility (F20) | Need for macroprudential regulations (E44) |
| Domestic financial regulations (G28) | Effectiveness of capital mobility (F20) |
| Capital controls (F38) | Stabilize exchange rates (F31) |
| Capital controls (F38) | Reduce financial market distortions (G18) |
| Capital controls (F38) | Mitigate overborrowing (G51) |
| Imposing capital controls (F38) | Short-term stabilization (E63) |
| Imposing capital controls (F38) | Long-term distortions (H31) |