The Impact of Bretton Woods International Capital Controls on the Global Economy and the Value of Geopolitical Stability: A General Equilibrium Analysis / Lee E. Ohanian, Paulina Restrepo-Echavarria, Diana Van Patten, Mark L.J. Wright.

Format:

Book

Author/Creator:

Ohanian, Lee E.

Contributor:

National Bureau of Economic Research.

Restrepo-Echavarria, Paulina.

Van Patten, Diana.

Wright, Mark L.J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w31595.

NBER working paper series no. w31595

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2023.

Summary:

This paper quantifies the positive and normative impact of Bretton Woods capital controls on global and regional economic activity. A three-region DSGE capital flows accounting framework consisting of the U.S., Western Europe, and the Rest of the World (ROW) is developed to quantify capital controls and evaluate their impact on the world economy. We find these controls had large effects. Counterfactual analysis show world output would have been 0:5 percent higher had there been perfect capital mobility, with substantial capital flowing from the ROW to the U.S. Bretton Woods capital controls raised welfare substantially in the ROW, but at the expense of much lower U.S. welfare. Given the U.S.'s goal of keeping capital within these countries to preserve their stability during this period, we interpret lower U.S. welfare due to Bretton Woods as the implicit value the U.S. placed on preserving geopolitical stability in ally countries during the Cold War.

Notes:

Print version record

August 2023.