European Parliament Library

The New Economics of Capital Controls Imposed for Prudential Reasons+L4888, Anton Korinek

Abstract
This paper provides an introduction to the new economics of prudential capital controls in emerging economies. This literature is based on the notion that there are externalities associated with financial crises because individual market participants do not internalize their contribution to aggregate financial instability when they make their finacing decisions. As a result they impose externalities in the form of greater financial instability on each other, and the private financing decisions of individuals are distorted towards excessive risk-taking. We discuss how prudential capital controls can induce private agents to internalize these externalities and thereby increase macroeconomic stability and enhance welfare
Table Of Contents
Cover; Contents; 1 Introduction; List of Figures; 1 Capital Mobility and Financial Fragility; 2 Schematics of Financial Amplification Effects; 2 Models of Financial Crises; 2.1 A Brief History; 2.2 Balance Sheet Effects and Financial Amplification; 2.3 A Simple Model of Financial Amplification; 2.3.1 Model Setup; 2.3.2 Financial Constraint; 2.3.3 Model Solution; 3 Financial Amplification and Pecuniary Externalities; 3.1 Pecuniary Externalities and Efficiency; 3.2 Pecuniary Externalities in Open Economy Macroeconomics; 3.3 Undervaluation of Liquidity; 4 Financing Decisions and Capital Controls
Language
eng
Literary Form
non fiction
Note
Description based upon print version of record
Physical Description
1 online resource (40 p.)
Specific Material Designation
remote
Form Of Item
online
Isbn
9781283552172

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