"Can Short-Term Capital Controls Promote Capital Inflows?"
BY: TITO CORDELLA
International Monetary Fund (IMF)
Universitat Pompeu Fabra
Document: Available from the SSRN Electronic Paper Collection:
http://papers.ssrn.com/paper.taf?abstract_id=139633
Paper ID: IMF Working Paper No. 98/131
Date: September 1998
Contact: TITO CORDELLA
Email: Mailto:tcordella at imf.org
Postal: International Monetary Fund (IMF)
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Washington, DC 20431 USA
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ABSTRACT:
In an economy a 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.
JEL Classification: F32, G14, G24