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Capital Controls and International Trade Finance

Author

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  • Giovannini, Alberto
  • Park, Jae Won

Abstract

This paper studies the effects of prohibiting individuals from holding foreign assets, and of allowing firms to trade in foreign assets only up to what is needed to finance export and import activities. Although firms can perform arbitrage between domestic and foreign financial markets, this arbitrage does not eliminate the distortions in asset markets; instead, the distortions are transmitted to the domestic goods market. The paper discusses the effects of shocks in foreign financial markets and in domestic fiscal policy. We show that both the dynamics and steady states are crucially affected by capital controls.

Suggested Citation

  • Giovannini, Alberto & Park, Jae Won, 1989. "Capital Controls and International Trade Finance," CEPR Discussion Papers 343, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:343
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    Citations

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    Cited by:

    1. Zehri, Chokri, 2022. "Asymmetric impact of capital controls on international trade," The Journal of Economic Asymmetries, Elsevier, vol. 25(C).
    2. Alberto Giovannini, 1992. "Bretton Woods and Its Precursors: Rules Versus Discretion in the History of International Monetary Regimes," NBER Working Papers 4001, National Bureau of Economic Research, Inc.
    3. Daniele Checchi, 1992. "What are the Real Effects of Liberalizing International Capital Movements?," Open Economies Review, Springer, vol. 3(1), pages 83-125, February.

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