Andreasen, Eugenia; Bauducco, Sofía; Dardati, Evangelina - 2021
This paper studies the effect of capital controls on misallocation and welfare in an economy with financial constraints … scale, capital controls that tax international borrowing hit them harder. As a result, misallocation increases relatively …, the model predicts a sizable aggregate loss of 2.39 percent when capital controls are introduced, with welfare decreasing …