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Title: |
The Timing of Exchange Regime Collapse under
Capital Controls |
| Author: |
Park, Daekeun;
Sachs, Jeffrey D. |
| Author
Affiliation: |
Hanyang U;
Harvard U |
| Source: |
International Economic Journal, Winter 1996, v. 10, no. 4, pp. 123-141 |
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Publication Date: |
Winter 1996 |
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Abstract: |
This paper investigates the nature of
balance-of-payments crises in regimes with capital controls. It extends
earlier works on capital controls by assuming that households manage
their consumption and asset portfolios to maximize intertemporal
utility. Our main result is that capital controls are effective in
delaying, but not preventing, a breakdown of a fixed exchange rate
regime in the presence of money-financed fiscal deficits. |
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