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DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalControlsLeak"OlivierJeanne(JHU)IMFAnnualResearchConferenceNovember13-142014IntroductionJohnWilliamson(1995),TheManagementofCapitalInows,madethecaseforprudentialcapitalcontrols,withChileanURRasposterchild1998:ChiliabandonsitscapitalcontrolsTheBankofChilihadbecomewearyoftheracebetweenregulationandcircumventionCircumventionisarst-orderissueforthefutureofcapitalowmanagement(throughcapitalcontrols)OlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalIntroductionBengui-Bianchi(BB)presentamodelBuildsonthenewliteratureonprudentialcontrols(Korinek,2010;Bianchi,2011;etc)AnimportantquestionandausefulcontributiontheoristsoftendonotpayattentiontocircumventionOlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalSummaryBianchi(2011)classofmodelsinwhichtheboom-bustcycleincapitalowsismagniedbyuctuationsinthevalueofthecountry's"internationalcollateral"aPigouviantaxondebtinowscanbeusedtosmoothouttheexcessivevolatilityincapitalows.
DeparturefromBianchi(2011):thetaxappliesonlytoasubsetofagentsLeakage:theeectoftaxispartiallyundonebybytheactionsoftheunregulatedagentsOlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalSummaryResultsThegainsfrommacroprudentialcontrolsmayremainsusbstantialinspiteofleakageTheoptimaltaxoncapitalinowscouldbelowerorhigherthanintheabsenceofleakageMacroprudentialpolicycanhavesignicantredistributiveeectsbetweenregulatedandunregulatedborrowersOlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalCommentsIlikethepaperThereseemstobesomethinggenericaboutthequestionaskedbyBBsomethingthatdoesnotdependonthedetailsofthenancialfrictiontobemitigatedbymacroprudentialregulationLetmeexploretheanswer(s)withamoresimple(andadhoc)model(Jeanne,2014)OlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalCommentsAssumeidenticalatomisticborrowerswithex-antewelfareV(d,D)(1+r)ddindividualdebtDaggregatedebtUDτ)andtheunregulatedborrowers(withγi≤τ)denotebydrandduthedebtoftherepresentativeagentineachgroupIncreasingτshiftsborrowersfromtheregulatedgrouptotheunregulatedgroupExtensivemargin→reasontomoderateregulationOlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalCommentsLetusmake"Calvinist"assumptionthatborrowersarepredestinedtobeinregulatedorunregulatedgroup(likeBB)γi=0forsomeborrowersandγi=+∞forothersThenleakageoperatescompletelyattheintensivemargininsidetheunregulatedgroupIncompleteosetofmacroprudentialpolicydrτg.
,largermsvs.
smallborrowers;ForbesonChile)ButseemsextremetoassumethatsomeagentsarecaptiveatanyleveloftaxinBianchi(2011)theoptimaltaxcanexceed20%:isn'tittoohighTheprivatesectorcanreducethecostofcircumventionbyinvestingin"circumventionalcapital"dynamicproblem:thetaxshouldnotbekepttoohighfortoolongItisdiculttodierentiatethetaxbytypeofinows(KleinandShambaugh,2013)OlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapitalConclusionsVerynicepaperOnelastthought:onereasontomanagecapitalowsthroughreservesratherthancapitalcontrolsmayberelatedtocircumventionTHANKYOUOlivierJeanne(JohnsHopkinsUniversity)DiscussionofBenguiandBianchi's"CapitalFlowManagementwhenCapital