The microeconomic evidence on capital controls
Subtitle: no free lunch
By: Kristin J. Forbes.
Contributors: National Bureau of Economic Research.
Series: NBER working paper series ;; working paper 11372; Working paper series (National Bureau of Economic Research : Online) ;; working paper no. 11372.
Publisher: National Bureau of Economic Research
Published: 2005
Place of publication: Cambridge, MA
Language: eng
Format: Electronic resource
Subjects: Capital -- Accounting.; Capital market.; Capital movements.; Microeconomics.
Description: "Macroeconomic analyses of capital controls face a number of imposing challenges and have yielded mixed results to date.  This paper takes a different approach and surveys an emerging literature that evaluates various microeconomic effects of capital controls and capital account liberalization.  Several key themes emerge.  First, capital controls tend to reduce the supply of capital, raise the cost of financing, and increase financial constraints - especially for smaller firms, firms without access to international capital markets and firms without access to preferential lending.  Second, capital controls can reduce market discipline in financial markets and the government, leading to a more inefficient allocation of capital and resources.  Third, capital controls significantly distort decision-making by firms and individuals, as they attempt to minimize the costs of the controls or even evade them outright.  Fourth, the effects of capital controls can vary across different types of firms and countries, reflecting different pre-existing economic distortions.  Finally, capital controls can be difficult and costly to enforce, even in countries with sound institutions and low levels of corruption.  This microeconomic evidence on capital controls suggests that they have pervasive effects and often generate unexpected costs.  Capital controls are no free lunch"--National Bureau of Economic Research web site.
Notes: Also available in print.
Includes bibliographical references.
Title from PDF file as viewed on 7/1/2005.
System requirements: Adobe Acrobat Reader.
Mode of access: World Wide Web.