Capital Controls and Trade Policy

Previously circulated and presented with the title: Capital Controls and Free-Trade Agreements. We are especially grateful to Giancarlo Corsetti for many helpful discussions. We also thank Laura Alfaro (discussant), Pol Antras, Gianluca Benigno, Paul Bergin, Charles Brendon, Tiago Cavalcanti, Luca Dedola, Rob Feenstra, Rebecca Freeman, Pierre-Olivier Gourinchas, Juan Carlos Hallak (discussant), Oleg Itskhoki, Dennis Reinhardt, Alan Taylor, Shang-Jin Wei (editor) and Robert Zymek, as well as presentation attendees at the University of Cambridge, Bank of England, Money, Macro and Finance Annual Conference 2021, Royal Economic Society Annual Conference 2021, European Economic Association Annual Conference 2022, CRETE 2022, the 2022 London Junior Macro Workshop, the V Spanish Macroeconomics Network Conference, the Global Research Forum on International Macroeconomics and Finance (FRB New York), and the NBER Conference on International Fragmentation, Supply Chains and Financial Frictions (Banco Central de Chile) for useful comments. Any views expressed are solely those of the authors and so cannot be taken to represent those of the Bank of England or to state Bank of England policy. This paper should therefore not be reported as representing the views of the Bank of England or members of the Monetary Policy Committee, Financial Policy Committee or Prudential Regulation Committee. Marin acknowledges support from the Janeway Institute at the University of Cambridge. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.