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The Information Content of Capital Controls / Owen Nie.
World Bank Open Knowledge Repository (formerly "World Bank E-Library Publications") Available online
View online- Format:
- Book
- Government document
- Author/Creator:
- Nie, Owen.
- Series:
- Policy research working papers.
- World Bank e-Library.
- Language:
- English
- Subjects (All):
- Business Cycles and Stabilization Policies.
- Capital Controls.
- Capital Flows.
- Capital Markets and Capital Flows.
- Emerging Market Economies.
- Finance and Financial Sector Development.
- Financial Crisis.
- Financial Economics.
- Financial Flows.
- Financial Regulation.
- Financial Regulation and Supervision.
- International Financial Markets.
- Macroeconomic Management.
- Macroeconomics and Economic Growth.
- Macroprudential Policy.
- Nowcasting.
- Local Subjects:
- Business Cycles and Stabilization Policies.
- Capital Controls.
- Capital Flows.
- Capital Markets and Capital Flows.
- Emerging Market Economies.
- Finance and Financial Sector Development.
- Financial Crisis.
- Financial Economics.
- Financial Flows.
- Financial Regulation.
- Financial Regulation and Supervision.
- International Financial Markets.
- Macroeconomic Management.
- Macroeconomics and Economic Growth.
- Macroprudential Policy.
- Nowcasting.
- Physical Description:
- 1 online resource (53 pages)
- Place of Publication:
- Washington, D.C. : The World Bank, 2020.
- System Details:
- data file
- Summary:
- Capital controls, policy measures used by governments to regulate cross-country financial flows, have become standard policy options in many emerging market economies. This paper will focus on what capital controls reveal about the state of the economy and the implications of such revelation for policy efficacy. Using a small open economy model with a collateral constraint and over-borrowing relative to the social optimum, I incorporate a representative agent's Bayesian updating of information in response to change in policy and show that the efficacy of capital controls to contain financial crises and improve welfare could be undermined if the agent rationally learns from policy. Empirically, this paper finds that capital controls convey important information market participants use to improve their understanding of fundamentals. This paper highlights the need for policymakers to take into account the un-intended consequences of information revelation in the design of capital ow management policies.
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