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Capital Controls and Firm's Dynamics

Capital Controls and Firm's Dynamics

Alexei G. Orlov
Copyright: © 2006 |Pages: 33
ISBN13: 9781591406495|ISBN10: 1591406498|ISBN13 Softcover: 9781591406501|EISBN13: 9781591406518
DOI: 10.4018/978-1-59140-649-5.ch013
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MLA

Orlov, Alexei G. "Capital Controls and Firm's Dynamics." Computational Economics: A Perspective from Computational Intelligence, edited by Shu-Heng Chen, et al., IGI Global, 2006, pp. 235-267. https://doi.org/10.4018/978-1-59140-649-5.ch013

APA

Orlov, A. G. (2006). Capital Controls and Firm's Dynamics. In S. Chen, L. Jain, & C. Tai (Eds.), Computational Economics: A Perspective from Computational Intelligence (pp. 235-267). IGI Global. https://doi.org/10.4018/978-1-59140-649-5.ch013

Chicago

Orlov, Alexei G. "Capital Controls and Firm's Dynamics." In Computational Economics: A Perspective from Computational Intelligence, edited by Shu-Heng Chen, Lakhmi Jain, and Chung-Ching Tai, 235-267. Hershey, PA: IGI Global, 2006. https://doi.org/10.4018/978-1-59140-649-5.ch013

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Abstract

This chapter constructs a dynamic model of a multinational enterprise (MNE) to quantify the effects of various capital control policies on a firm’s debt and equity positions, innovations, and outputs at the headquarters and subsidiary. The model is calibrated to the US Foreign Direct Investment (FDI) Benchmark Survey and the IMF’s Exchange Arrangements and Exchange Restrictions so that it reproduces the average US FDI and technology flows to foreign subsidiaries. Both steady-state and transition analyses suggest a significant impact of capital controls on an MNE’s operations. Lifting capital restrictions produces an inflow of capital and technology into the less developed countries, leading to an increase in the steady-state FDI position and production. Simulation experiments reveal that even short-term capital controls have long-lasting negative effects.

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