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RIEB, Kobe University Site Map Access 日本語 Home Research & Education Publications RIEB Discussion Paper Series (English) RIEB Discussion Paper Series No.2016-11 RIEB Discussion Paper Series No.2016-11 Title Capital Controls as a Credit Policy Tool in a Small Open Economy Abstract We develop a sticky price, small open economy model with financial frictions à la Gertler and Karadi (2011), in combination with liability dollarization. An agency problem between domestic financial intermediaries and foreign investors of emerging economies introduces financial frictions in the form of time-varying endogenous balance sheet constraints on the domestic financial intermediaries. We consider a shock that tightens the balance sheet constraint and show that capital controls, the effects of which are rigorously examined as a policy tool for the emerging economies, can be a credit policy tool to mitigate the negative shock. Keywords Capital control, Credit policy, Balance sheets, Small open economy, Nominal rigidities, New Keynesian; DSGE, Financial intermediaries, Financial frictions; Crisis JEL Classification E44, E58, F32, F38, F41 Inquiries Shigeto KITANO Research Institute for Economics and Business Administration Kobe University Rokkodai-cho, Nada-ku, Kobe 657-8501 Japan Phone: +81-78-803-7036 FAX: +81-78-803-7059 Kenya TAKAKU Faculty of International Studies, Hiroshima City University About RIEB Faculty Seminars at RIEB Research & Education Sections Kobe University Site Policy Site Map Access Contact Us Copyright©1996-2018 Research Institute for Economics and Business Administration, Kobe University. All Rights Reserved.