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| dc.title | Welfare Effects of Capital Controls |
| dc.contributor.author | Andreasen, Eugenia |
| dc.contributor.author | Bauducco, Sofía |
| dc.contributor.author | Dardati, Evangelina |
| dc.contributor.orgunit | Department of Research and Chief Economist |
| dc.coverage | Chile |
| dc.date.available | 2021-06-02T00:00:00 |
| dc.date.issue | 2021-06-02T00:00:00 |
| dc.description.abstract | This paper studies the effect of capital controls on misallocation and welfare in an economy with financial constraints. We build a general equilibrium model with heterogeneous firms, financial constraints and international trade and calibrate it to the Chilean economy. Since high-productivity and exporting firms need to borrow more to reach their optimal scale, capital controls that tax international borrowing hit them harder. As a result, misallocation increases relatively more for this group of firms, and for young firms that are still trying to reach their optimal scale. In terms of welfare, the model predicts a sizable aggregate loss of 2.39 percent when capital controls are introduced, with welfare decreasing twice as much for high-productivity firms. We empirically corroborate the main insights in terms of misallocation obtained from the model using Chilean manufacturing firm data from 1990 to 2007. |
| dc.format.extent | 53 |
| dc.identifier.doi | http://dx.doi.org/10.18235/0003307 |
| dc.identifier.url | https://publications.iadb.org/publications/english/document/Welfare-Effects-of-Capital-Controls.pdf |
| dc.language.iso | en |
| dc.medium | Adobe PDF |
| dc.publisher | Inter-American Development Bank |
| dc.subject | International Trade |
| dc.subject | Taxation |
| dc.subject | Financial Friction |
| dc.subject | Exporting Firm |
| dc.subject | Interest Rate |
| dc.subject | High-Productivity |
| dc.subject | Capital Control |
| dc.subject | Export Activity |
| dc.subject.jelcode | F41 - Open Economy Macroeconomics |
| dc.subject.jelcode | O47 - Empirical Studies of Economic Growth • Aggregate Productivity • Cross-Country Output Convergence |
| dc.subject.jelcode | F12 - Models of Trade with Imperfect Competition and Scale Economies • Fragmentation |
| dc.subject.keywords | International trade;Financial Frictions;welfare;Capital controls;Misallocation |
| dc.type | Working Papers |
| idb.identifier.pubnumber | IDB-WP-01229 |
| idb.operation | RG-T3103 |