Private Capital Flows, Capital Controls and Default Risk

Journal article

Mark L.J. Wright
Journal of International Economics, vol. 69(1), 2006 Jun, pp. 120-149

DOI: https://doi-org.homer.idm.oclc.org/10.1016/j.jinteco.2005.05.007

Cite

APA Click to copy
Wright, M. L. J. (2006). Private Capital Flows, Capital Controls and Default Risk. Journal of International Economics, 69(1), 120–149. https://doi.org/https://doi-org.homer.idm.oclc.org/10.1016/j.jinteco.2005.05.007

Chicago/Turabian Click to copy
Wright, Mark L.J. “Private Capital Flows, Capital Controls and Default Risk.” Journal of International Economics 69, no. 1 (June 2006): 120–149.

MLA Click to copy
Wright, Mark L. J. “Private Capital Flows, Capital Controls and Default Risk.” Journal of International Economics, vol. 69, no. 1, June 2006, pp. 120–49, doi:https://doi-org.homer.idm.oclc.org/10.1016/j.jinteco.2005.05.007.

BibTeX Click to copy

@article{mark2006a,
  title = {Private Capital Flows, Capital Controls and Default Risk},
  year = {2006},
  month = jun,
  issue = {1},
  journal = {Journal of International Economics},
  pages = {120-149},
  volume = {69},
  doi = {https://doi-org.homer.idm.oclc.org/10.1016/j.jinteco.2005.05.007},
  author = {Wright, Mark L.J.},
  month_numeric = {6}
}

Abstract

What has been the effect of the shift in emerging market capital flows toward private sector borrowers? Are emerging market capital flows more efficient? If not, can controls on capital flows improve welfare? This paper shows that the answers depend on the form of default risk. When private loans are enforceable, but there is the risk that the government will default on behalf of all residents, private lending is inefficient and capital controls are potentially Pareto-improving. However, when private agents may individually default, capital flow subsidies are potentially Pareto-improving.

JEL classification: F21, F34, F41, O19

Keywords: Capital flows, Default, Borrowing constraints, Capital controls, Capital subsidies