NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Huigang Chen

Uber Technologies Inc.

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Institutional Affiliation: Uber Technologies Inc

NBER Working Papers and Publications

May 2016Optimal Capital Controls and Real Exchange Rate Policies: A Pecuniary Externality Perspective
with Gianluca Benigno, Christopher Otrok, Alessandro Rebucci, Eric R. Young: w22224
A new theoretical literature studies the use of capital controls to prevent financial crises in models in which pecuniary externalities justify government intervention. Within the same theoretical framework, we show that when ex-post policies such as defending the exchange rate can contain or resolve financial crises, there is no need to intervene ex-ante with capital controls. On the other hand, if crises management policies entail some efficiency costs, then crises prevention policies become part of the optimal policy mix. In the standard model economy used in the literature with costly crisis management policies, the optimal policy mix combines capital controls in tranquil times with support for the real exchange rate to limit its depreciation during crises times. The optimal policy mix...

Published: Gianluca Benigno & Huigang Chen & Christopher Otrok & Alessandro Rebucci & Eric R. Young, 2016. "Optimal Capital Controls and Real Exchange Rate Policies: A Pecuniary Externality Perspective," Journal of Monetary Economics, . citation courtesy of

 
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