Resources on Capital Controls

Resources for our 2021 JEL Paper on Capital Controls:

surveys the literature on capital controls using a teachable model and an in-depth review of the empirical literature

  • Practice Problems [PDF]

    • Instructors only: feel free to contact me about solutions

Additional writings on capital controls and externalities:

Managing Capital Flows: Theoretical Advances and IMF Policy Frameworks [PDF], IEO Background Paper BP/20-02/01 for IEO evaluation of "IMF Advice on Capital Flows," Aug. 2020.

Synthesizes theoretical research on managing capital flows from a policy perspectives and evaluates to what extent the IMF's policy frameworks align with it

Managing Credit Booms and Busts: A Pigouvian Taxation Approach [Publication | 2010 NBER WP | Appendix | Matlab], with Olivier Jeanne, Journal of Monetary Economics 107, pp. 2-17, Nov. 2019.

A dynamic model of counter-cyclical macro-prudential regulation for credit markets - cited in Economist's Economics Focus,

Regulating Capital Flows to Emerging Markets: An Externality View [Publication | WP | Appendix], Journal of International Economics 111, pp. 61-80, Mar. 2018.

Foundations for prudential capital controls to reduce the risk of financial crises in emerging economies

Pecuniary Externalities in Economies with Financial Frictions [Publication | WP | Appendix | Slides], with Eduardo Dávila, Review of Economic Studies 85(1), pp. 352–395, Jan. 2018.

Develops a general methodology to categorize & characterize pecuniary externalities from both imperfect risk-sharing and collateral constraintsNote: this paper subsumes my earlier working paper on "Systemic Risk-Taking: Amplification Effects, Externalities, and Regulatory Responses" [2011 ECB WP | 2012 update] and was previously also circulated under the title "Fire-Sale Externalities."

Capital Controls or Macroprudential Regulation? [Publication | WP | IMF WP], with Damiano Sandri, Journal of International Economics 99(S1), pp. 27-42, Mar. 2016.

Both instruments are needed in emerging economies that are at risk of financial instability because of large capital inflows

From Sudden Stops to Fisherian Deflation: Quantitative Theory and Policy [Publication | WP | Data and Matlab codes], with Enrique Mendoza, Annual Review of Economics 6, pp. 299-332, Aug. 2014.

Provides an introduction to quantitative models and the empirics of sudden stops, with ample online resources

The New Economics of Prudential Capital Controls [Publication |WP | Kindle], IMF Economic Review 59(3), pp. 523-561, Aug. 2011. Also IMF Working Paper 11/298.

An introduction to the emerging new literature on prudential capital controls in emerging economies - cited in the FT's Economists' Forum and the Economist's Free Exchange

Hot Money and Serial Financial Crises [Publication | WP | Slides], IMF Economic Review 59(2), pp. 306-339, June 2011.

Crises in one area of the world economy cause "hot money" to flow into other areas and create the risk of serial financial crises

Foreign Currency Debt, Risk Premia and Macroeconomic Volatility [Publication | WP], European Economic Review 55, pp. 371-385, Apr. 2011.

Excessive Volatility in Capital Flows: A Pigouvian Taxation Approach [Publication | WP | Online Appendix], with Olivier Jeanne, American Economic Review P&P 100(2), pp. 403-407, May 2010.

Provides a simple three-period model of financial amplification and pecuniary externalities based on asset price feedback effects