Speaker: Prof. Guangyu Nie, College of Business, Shanghai University of Finance and Economics

Time: 10:30-12:00 a.m., May 14, 2024, GMT+8

Venue: Room 245

Abstract: 

This paper develops a simple theory of capital controls as dynamic terms-of-trade manipulation, when the policy maker cannot commit to future policies, and chooses current taxes on international capital flows in order to maximize the welfare of its representative agent, while the other country is passive. In this situation, capital control not only affects the country's current terms-of-trade, but also affect its future terms-of-trade and future policy makers' optimal policies. We find that using capital control to manipulate term-of-trade not only reduces other countries welfare, i.e., it is a “beggar-thy-neighbor” policy, it could also be welfare reducing from the country's own perspective.

Source: National School of Development, PKU