Capital Controls and the International Monetary System

This research project develops a rigorous new theoretical way to study controls of international capital flows and determine their optimal magnitude using a promising new empirical methodology.

The international monetary system has too long been ruled by a belief that free markets always know best. This project studies how capital controls may be an effective way of countering large capital inflows to a country that is at danger of future financial crises and will promote the use of sufficient statistics approaches to quantify optimal capital control measures as an alternative to existing DSGE methods of policy analysis in macroeconomics and international finance. The project also aims to provide new insights on the global general equilibrium effects of capital controls and the desirability of international coordination.