Capital controls and trade policy

• 成果类型: Article
• 署名作者: Lloyd, Simon P.; Marin, Emile A.
• 署名单位: Bank of England; University of California System; University of California Davis
• 刊物名称: JOURNAL OF INTERNATIONAL ECONOMICS
• ISSN/ISSBN: 0022-1996
• DOI: 10.1016/j.jinteco.2024.103965
• 发表日期: 2024
• 关键词: Capital-flow management; Free-trade agreements; Ramsey policy; TARIFFS; Trade policy

摘要

How does optimal capital-flow management change with prevailing trade policies? We study the joint optimal determination of capital controls and trade tariffs in a two-country, two-good model with trade in goods and assets. Because countries are large in both markets, a countryplanner can achieve higher domestic welfare by departing from free trade in addition to levying capital controls, despite the cooperative optimal allocation being efficient. However, time variation in the optimal tariff induces households to over- or under-borrow through its effects on the path of the real exchange rate. As a result, optimal capital controls are generally smaller when trade policy is constrained (i.e., by a Free-Trade Agreement), but, absent retaliation, can be larger depending on the paths of underlying fundamentals.