Capital Controls with International Reserve Accumulation : Can this Be Optimal ? 1

  title={Capital Controls with International Reserve Accumulation : Can this Be Optimal ? 1},
  author={Philippe Bacchetta},
Motivated by the Chinese experience, we analyze a semi-open economy where the central bank has access to international capital markets, but the private sector has not. This enables the central bank to choose an interest rate different from the international rate. We examine the optimal policy of the central bank by modelling it as a Ramsey planner who can choose the level of domestic public debt and of international reserves. The central bank can improve savings opportunities of credit… CONTINUE READING
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