Capital Controls and the International Monetary System

The international monetary system has too long been ruled by a belief that free markets always know best. This project will develop a rigorous way to study controls of international capital flows based on a promising new methodology. It will study, for example, how capital controls may be an effective way of countering large capital inflows to a country that is at danger of a future financial crisis. The project also will develop a new methodological approach to quantify optimal capital control measures. This approach is designed to serve as an alternative to traditional DSGE methods of policy analysis in macroeconomics and international finance. The work will aim to provide new insights on the effectiveness of capital controls and will promote the use of sufficient statistics approaches as an alternative to existing DSGE methods of policy analysis in macroeconomics and international finance.