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CONTAGIOUS POLICIES: AN ANALYSIS OF SPATIAL INTERACTIONS AMONG COUNTRIES' CAPITAL ACCOUNT POLICIES
Author(s) -
Steiner Andreas
Publication year - 2010
Publication title -
pacific economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.34
H-Index - 33
eISSN - 1468-0106
pISSN - 1361-374X
DOI - 10.1111/j.1468-0106.2010.00511.x
Subject(s) - economics , panel data , capital (architecture) , capital flows , macroeconomics , exchange rate , econometric model , econometric analysis , monetary economics , international economics , econometrics , microeconomics , profit (economics) , archaeology , history
Countries' capital account policies might be contagious in the sense that domestic policies are driven by other countries' policies. A model of strategic interactions is developed to show that countries' best response to policy changes elsewhere consists in imitating this policy. Using a spatial econometric model, the hypothesis of policy interactions is tested in a large panel data set. The evidence shows that capital account policies are contemporaneously correlated across countries. Concerning fundamentals, the move to a fixed exchange rate regime and an increase in real world interest rates are correlated with the imposition of capital account restrictions.