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| Author: | Wijnbergen, S. van |
| Title: | Capital controls and the real exchange rate |
| Journal: | Economica
1990 : FEB, VOL. 57:225, p. 15-28 |
| Index terms: | CAPITAL IMPORTS CONTROL CONSUMER ATTITUDES EXCHANGE RATES CONSUMERS |
| Language: | eng |
| Abstract: | Capital import taxes cause lower world interest rates but raise home interest rates. Real rates imply a shift of home expenditure from today to tomorrow and of foreign expenditure from the future to today. If the pattern of expenditure is the same at home and abroad, this change in composition has no consequence for demand for any commodity. Imposing capital controls has no effects on the real exchange rate. If consumers have a preference for domestically produced goods, the shift in composition of world expenditure, from expenditure by domestic consumers to expenditure by foreign ones, implies a decline in demand for home goods. |
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