01944cas a2200253 a 4500 AALejournalIMF004669 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451865721 1018-5941 BD-DhAAL BD-DhAAL Zhang, Zhiwei. Collateral Damage : Exchange Controls and International Trade / Zhiwei Zhang, Shang-Jin Wei. Washington, D.C. : International Monetary Fund, 2007. 1 online resource (27 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students While new conventional wisdom warns that developing countries should be aware of the risks of premature capital account liberalization, the costs of not removing exchange controls have received much less attention. This paper investigates the negative effects of exchange controls on trade. To minimize evasion of controls, countries often intensify inspections at the border and increase documentation requirements. Thus, the cost of conducting trade rises. The paper finds that a one standard-deviation increase in the controls on trade payment has the same negative effect on trade as an increase in tariff by about 14 percentage points. A one standard-deviation increase in the controls on FX transactions reduces trade by the same amount as a rise in tariff by 11 percentage points. Therefore, the collateral damage in terms of foregone trade is sizable. Mode of access: Internet Wei, Shang-Jin. IMF Working Papers; Working Paper ; No. 2007/008 Full text available on IMF http://elibrary.imf.org/view/journals/001/2007/008/001.2007.issue-008-en.xml IMF e-Library