New York Fed paper warns of negative welfare effects of capital controls

A staff report from the Federal Reserve Bank of New York has developed a welfare-based analysis of whether or how countries should tax international borrowing to restrict international capital flows – finding that while it can be beneficial for individual countries, it limits cross-border pooling of risk.

Moreover, the paper, authored by Bianca De Paoli and Anna Lipińska, finds there is a possibility of ‘capital control wars' if countries pursue capital control policies, and that there would be

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