TY  - JOUR
AU  - Dooley,Michael P.
AU  - Chinn,Menzie
TI  - Financial Repression and Capital Mobility: Why Capital Flows and        Covered Interest Rate Differentials Fail to Measure Capital Market Integration
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 5347
PY  - 1995
Y2  - November 1995
UR  - http://www.nber.org/papers/w5347
L1  - http://www.nber.org/papers/w5347.pdf
N1  - Author contact info:
Michael P. Dooley
Department of Economics
Engineering II
University of California, Santa Cruz
Santa Cruz, CA 95064
Tel: 831/459 3662
Fax: 831/459-5077
E-Mail: MPD@UCSC.EDU

Menzie D. Chinn
Dept. of Economics
University of Wisconsin
1180 Observatory Drive
Madison, WI 53706
Tel: 608/262-7397
Fax: 608/262-2033
E-Mail: mchinn@lafollette.wisc.edu
AB  - Required reserves on banks' deposit liabilities have been utilized by both industrial and developing countries to discourage and sterilize international capital flows.  In this paper we utilize an open economy macro model incorporating bank credit to evaluate this policy.  The model suggests that high levels of reserve requirements are a perverse policy tool in that they amplify the effects of foreign monetary shocks, but changes in reserve requirements can insulate a repressed financial market from international financial shocks.  The model also suggests that traditional measures of capital mobility such as interest parity conditions or the scale of gross private capital flows are of no value in assessing the openness of repressed financial systems.
ER  -