Capital Controls, Exchange Rate Volatility, and the Risk Premium

Frenkel, Michael; Stadtmann, Georg

doi:10.3790/schm.124.3.371

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Frenkel, M., Stadtmann, G. Capital Controls, Exchange Rate Volatility, and the Risk Premium. Journal of Contextual Economics – Schmollers Jahrbuch, 124(3), 371-386. https://doi.org/10.3790/schm.124.3.371

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Capital Controls, Exchange Rate Volatility, and the Risk Premium

Frenkel, Michael | Stadtmann, Georg

Journal of Contextual Economics – Schmollers Jahrbuch, Vol. 124 (2004), Iss. 3 : pp. 371–386

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Publisher Name: Duncker & Humblot
DOI: https://doi.org/10.3790/schm.124.3.371
Language: Multiple languages
Pages: 16

Frenkel, Michael

Stadtmann, Georg

Abstract

We use the Jeanne / Rose (2002) noise trader framework in foreign exchange markets to introduce a tax on international capital flows. As such a tax exerts two effects in opposite directions, we derive the capital control level that minimizes the risk premium and show the conditions under which a zero capital control level is optimal.

Section Title	Page	Action	Price
Frenkel / Stadtmann: Capital Controls, Exchange Rate Volatility, and the Risk Premium	371
Abstract	371
Zusammenfassung	371
1. Introduction	371
2. The Model	375
3. The Optimal Capital Control	379
4. Some lndirect Empirical Evidence	380
5. Summary and Conclusions	382
References	383

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Capital Controls, Exchange Rate Volatility, and the Risk Premium

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