Crises and capital controls in small open economies: a stock–flow consistent approach

Artikel

This paper attempts to explain the role of capital inflows in creating economic booms and busts in a small open economy with sovereign currency. We develop a stock–flow consistent (SFC) model for a small open economy while relying on the experience of the Icelandic crisis. We demonstrate the destabilising effects of capital inflows on the economy by allowing for a sudden stop, and also discuss the role of capital controls as a policy response in the event of a crisis due to sudden stops. Finally, we discuss the policy implications of our results in order to tackle the destabilising effects associated with financial flows in a small economy.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Journal: European Journal of Economics and Economic Policies: Intervention (EJEEP) ; ISSN: 2052-7772 ; Volume: 16 ; Year: 2019 ; Issue: 1 ; Pages: 94-133

Classification and Topics

• Classification: Wirtschaft ; General Aggregative Models: Keynes; Keynesian; Post-Keynesian ; Current Account Adjustment; Short-term Capital Movements ; International Financial Policy: Financial Transactions Tax; Capital Controls ; Open Economy Macroeconomics
• Subject: post-Keynesian ; stock–flow consistent ; monetary policy ; capital controls ; sudden stops ; financial crisis

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Raza, Hamid ; Gudmundsson, Bjorn Runar ; Zoega, Gylfi ; Byrialsen, Mikael Randrup
• Event: Veröffentlichung
• (who): Edward Elgar Publishing
• (where): Cheltenham
• (when): 2019

Further information

• DOI: doi:10.4337/ejeep.2019.0042
• Handle: http://hdl.handle.net/10419/277438
• Last update: 10.03.2025, 11:42 AM CET