A double-edged sword : high interest rates in capital-control regimes

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dc.contributor.author Gylfi Zoëga 1963 is
dc.date.accessioned 2013-12-20T14:14:17Z
dc.date.available 2013-12-20T14:14:17Z
dc.date.issued 2009-11
dc.identifier.issn 1028-9445
dc.identifier.uri http://hdl.handle.net/10802/4781
dc.description Myndefni: línurit is
dc.description.abstract This paper derives the relationship between central bank interest rates and exchange rates under a capital control regime. Higher interest rate may strengthen the currency by reducing consumption and imports and by inducing foreign owners of local currency assets not to sell local currency off shore. There is also an effect that goes in the opposite direction: Higher interest rates increase the flow of interest income to foreigners through the current account which makes the exchange rate fall. The historical financial crisis now under way in Iceland provides excellent testing grounds for the analysis. Overall, the experience does not suggest that cutting interest rates moderately from a very high level is likely to make a currency depreciate in a capital control regime but highlights the importance of effective enforcing of the controls. en
dc.format.extent 22 s. is
dc.language.iso en
dc.publisher Central Bank of Iceland, Economics Department is
dc.relation.ispartofseries Central Bank of Iceland., Working papers ; 47
dc.relation.uri http://www.sedlabanki.is/lisalib/getfile.aspx?itemid=7477
dc.subject Efnahagskreppur is
dc.subject Fjárfestingar is
dc.subject Vextir is
dc.subject Gjaldeyrishöft is
dc.subject Efnahagsstefna is
dc.title A double-edged sword : high interest rates in capital-control regimes en
dc.type Skýrsla is
dc.identifier.gegnir 001146609


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