International Economics Commons^™

Essays On The Economic Consequences Of Capital Controls, Richard J. Nugent Iii

Dissertations, Theses, and Capstone Projects

This dissertation consists of three chapters. In Chapter One, we review the literature on the economic consequences of capital controls. Capital controls are advocated as second-best policy in the presence of a pecuniary externality. Restricting capital inflows as a prudential tool during economic booms may distort the efficient allocation of capital but it invokes precautionary saving behavior so that agents do not overborrow. The financial crises that are fueled by capital market distortions can be mitigated by the use of prudential capital controls, heightened during the boom and released during the bust. The empirical evidence on capital controls has revealed …