Global Imbalances in a World of Inflexible Real Exchange Rates and Capital Controls

28 Pages Posted: 8 Dec 2011

See all articles by Andrew J. Hughes Hallett

Andrew J. Hughes Hallett

George Mason University - School of Policy, Government, and International Affairs

Juan Carlos Martinez Oliva

Bank of Italy; International Monetary Institute

Date Written: December 8, 2011

Abstract

This paper addresses the issue of international payments in a stock-flow framework, by capturing the interaction between the current account balance and international assets portfolios of domestic and foreign investors. It is argued that the stability of such interaction may be affected by shifts in the preferences of investors, by the relative rate of return of different assets, and - more in general - by institutional settings. The model is then used for policy analysis purposes to derive the conditions for the existence of dynamic equilibria, and if they can be attained, under the assumption of market-distorting policy choices.

Keywords: global economic imbalances, international payments, exchange rates, capital controls, current account balance, international assets portfolios

JEL Classification: F13, F32, F34

Suggested Citation

Hughes Hallett, Andrew and Martinez Oliva, Juan Carlos, Global Imbalances in a World of Inflexible Real Exchange Rates and Capital Controls (December 8, 2011). ADBI Working Paper No. 330, Available at SSRN: https://ssrn.com/abstract=1969774 or http://dx.doi.org/10.2139/ssrn.1969774

Andrew Hughes Hallett (Contact Author)

George Mason University - School of Policy, Government, and International Affairs ( email )

Founders Hall
3351 Fairfax Dr.
Arlington, VA 22201
United States

Juan Carlos Martinez Oliva

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

International Monetary Institute ( email )

No. 59, Zhongguancun Street
Beijing, Beijing 100080
China

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