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| Author: | Bartolini, L. Drazen, A. |
| Title: | When liberal policies reflect external shocks, what do we learn? |
| Journal: | Journal of International Economics
1997 : MAY, VOL. 42:3/4, p. 249-273 |
| Index terms: | CAPITAL SIGNALING ECONOMICS |
| Language: | eng |
| Abstract: | The authors present a model where policies of the capital mobility can signal governments' future policies, but the informativeness of the signal depends on the path of world interest rates. Capital flows to emerging markets reflect investors' perception of these markets' political risk. With low world interest rates, emerging markets experience a capital inflow and engage in widespread policy of free capital mobility; with higher rates, only sufficiently committed countries allow free capital mobility, whereas others impose control to trap capital onshore, thus signaling future policies affecting capital mobility. |
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