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Title: |
Capital Controls, Interest Rate Parity, and
Exchange Rates: A Theoretical Approach |
| Author: |
Otani, Ichiro;
Tiwari, Siddharth |
| Author
Affiliation: |
IMF |
| Source: |
International Economic Journal, Spring 1990, v. 4, no. 1, pp. 25-44 |
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Publication Date: |
Spring 1990 |
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Abstract: |
The purpose of this paper is to analyze,
from a theoretical point of view, the impact of capital controls on both
the spot and forward exchange rates. While the qualitative impact of
these controls on the exchange rates is straightforward, their
quantitative impact is shown to depend on several factors including the
speed of adjustment of the exchange rates, elasticities of demand for
and supply of financial assets, and the extent of capital controls. The
paper also analyzes the implications of capital controls for welfare or
economic efficiency. |
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