This paper explores two policy options in emerging market economies (EMEs) to cope with volatile capital flows due to external monetary policy shocks; capital control policy and choice of exchange rate regime. Both tools reinforce each other when a foreign exchange risk premium shock hits the economy. A contractionary U.S. monetary policy shock has significant real effects in EMEs. Conventional wisdom tells us that a free floating exchange rate with inflation targeting is better when a country faces foreign shocks. However, we show that a flexible exchange rate with less capital controls is not the best option in EMEs based on vector autoregression analysis. Moreover, we set up a small open economy new Keynesian model with real wage and price rigidities. It shows that the small economy with labor market frictions is more vulnerable to exogenous shocks such as a foreign exchange rate shock under a fixed exchange rate regime than under a flexible exchange regime. We show that maintaining price stability is not desirable when there are substantial frictions in the labor market and the intratemporal elasticity of substitution is high. Finally, the model shows that the welfare cost difference between a policy of maintaining purchasing power and a policy aimed at price stability reverses as the intratemporal elasticity of substitution between home and foreign goods increases.

中文翻译：

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亚洲新兴市场经济体的资本管制与货币政策

本文探讨了新兴市场经济体 (EME) 应对外部货币政策冲击导致的资本流动波动的两种政策选择；资本管制政策与汇率制度选择。当外汇风险溢价冲击经济时，这两种工具会相互加强。紧缩性的美国货币政策冲击对新兴市场经济体具有重大的实际影响。传统智慧告诉我们，当一个国家面临外国冲击时，以通胀为目标的自由浮动汇率更好。然而，我们表明，基于矢量自回归分析，具有较少资本管制的灵活汇率并不是新兴市场经济体的最佳选择。此外，我们建立了一个具有实际工资和价格刚性的小型开放经济新凯恩斯模型。这表明存在劳动力市场摩擦的小经济体在固定汇率制度下比在灵活汇率制度下更容易受到外生冲击，如汇率冲击。我们表明，当劳动力市场存在大量摩擦并且替代的时间内弹性很高时，保持价格稳定是不可取的。最后，该模型表明，随着本国商品和外国商品之间替代的时间内弹性增加，维持购买力的政策与旨在稳定价格的政策之间的福利成本差异发生逆转。我们表明，当劳动力市场存在大量摩擦并且替代的时间内弹性很高时，保持价格稳定是不可取的。最后，该模型表明，随着本国商品和外国商品之间替代的时间内弹性增加，维持购买力的政策与旨在稳定价格的政策之间的福利成本差异发生逆转。我们表明，当劳动力市场存在大量摩擦并且替代的时间内弹性很高时，保持价格稳定是不可取的。最后，该模型表明，随着本国商品和外国商品之间替代的时间内弹性增加，维持购买力的政策与旨在稳定价格的政策之间的福利成本差异发生逆转。