|
on International Finance |
| By: | Mitchener, Kris James (University of Warwick); Wandschneider, Kirsten (Occidental College) |
| Abstract: | We examine the first widespread use of capital controls in response to a global or regional financial crisis. In particular, we analyze whether capital controls mitigated capital flight in the 1930s and assess their causal effects on macroeconomic recovery from the Great Depression. We find evidence that they stemmed gold outflows in the year following their imposition; however, time-shifted, difference-indifferences (DD) estimates of industrial production, prices, and exports suggest that exchange controls did not accelerate macroeconomic recovery relative to countries that went off gold and floated. Countries imposing capital controls also appear to perform similar to the gold bloc countries once the latter group of countries finally abandoned gold. Time series regressions further demonstrate that countries imposing capital controls refrained from fully utilizing their newly acquired monetary policy autonomy. Even so, capital controls remained in place as instruments for manipulating trade flows and for preserving foreign exchange for the repayment of external debt. |
| Keywords: | capital controls, financial crises, Great Depression, interwar gold standard |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:warwcg:131&r=ifn |
| By: | Maurice Kugler (UNDP); Oren Levintal (Department of Economics, Bar-Ilan University); Hillel Rapoport (Paris School of Economics, University Paris 1 Pantheon-Sorbonne) |
| Abstract: | The gravity model has provided a tractable empirical framework to account for bilateral flows not only of manufactured goods, as in the case of merchandise trade, but also of financial flows. In particular, recent literature has emphasized the role of information costs in preventing larger diversification of financial investments. This paper investigates the role of migration in alleviating information imperfections between home and host countries. We show that the impact of migration on financial flows is strongest where information problems are more acute (that is, for more informational sensitive investments and between more culturally distant countries) and for the type of migrants that are most able to enhance the flow of information, namely, skilled migrants. We interpret these differential effects as additional evidence pointing to the role of information in generating home-bias and as new evidence of the role of migration in reducing information frictions between countries. |
| Keywords: | Migration, international financial flows, international loans, gravity models, information asymmetries |
| JEL: | F21 F22 O1 |
| URL: | http://d.repec.org/n?u=RePEc:crm:wpaper:1317&r=ifn |