Capital Mobility and Exchange Market Intervention in Developing Countries

UCSC Economics Dept. #365

Posted: 27 Feb 1997

See all articles by Michael P. Dooley

Michael P. Dooley

University of California at Santa Cruz; National Bureau of Economic Research (NBER)

Donald J. Mathieson

International Monetary Fund (IMF)

Liliana Rojas-Suarez

Center for Global Development

Multiple version iconThere are 2 versions of this paper

Date Written: September 1996

Abstract

Official controls on interest rates and capital flows have ruled out the use of traditional interest rate parity conditions to measure changes in the degree of capital mobility confronting developing countries. This paper develops an alternative technique for measuring the cost of undertaking disguised capital flows when such official controls are present. This measure is derived in the context of an intertemporal, optimizing model of an open economy that incorporates the influence of the authorities' monetary and exchange market intervention policies. Parameter estimates for Korea, Mexico and the Philippines indicate that the real cost of undertaking disguised capital flows declined, on average, by nearly 70 percent between the early 1970s and the late 1980s.

JEL Classification: F32, F34

Suggested Citation

Dooley, Michael P. and Mathieson, Donald J. and Rojas-Suarez, Liliana, Capital Mobility and Exchange Market Intervention in Developing Countries (September 1996). UCSC Economics Dept. #365, Available at SSRN: https://ssrn.com/abstract=4689

Michael P. Dooley (Contact Author)

University of California at Santa Cruz ( email )

Santa Cruz, CA 95064
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510-459-3662 (Phone)
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National Bureau of Economic Research (NBER)

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Donald J. Mathieson

International Monetary Fund (IMF) ( email )

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Liliana Rojas-Suarez

Center for Global Development ( email )

2055 L St. NW
5th floor
Washington, DC 20036
United States

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