Collateral Damage: Exchange Controls and International Trade,
NBER Working Paper No. 13020 While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises. The paper finds that a one standard-deviation increase in the controls on trade payment has the same negative effect on trade as an increase in tariff by about 14 percentage points. A one standard-deviation increase in the controls on FX transactions reduces trade by the same amount as a rise in tariff by 11 percentage points. Therefore, the collateral damage in terms of foregone trade is sizable. This paper is available as PDF (179 K) or via emailA non-technical summary of this paper is available in the December 2007 NBER Digest.
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Machine-readable bibliographic record - MARC, RIS, BibTeX Document Object Identifier (DOI): 10.3386/w13020 Published: Wei, Shang-Jin & Zhang, Zhiwei, 2007. "Collateral damage: Exchange controls and international trade," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 841-863, September. citation courtesy of Users who downloaded this paper also downloaded* these:
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