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WORKING PAPER 12-14
Capital Account Policies and the Real Exchange Rate
by Olivier Jeanne, Peterson Institute for International Economics
September 2012
This paper presents a simple model of how a small open economy can undervalue its real exchange rate using its capital account policies. The paper presents several properties of such policies, and proposes a rule of thumb to assess their welfare cost. The model is applied to an analysis of Chinese capital account policies.View full document [pdf]
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