I am trying to introduce capital controls in the two-country model using Chang et al.(2015).
But when I change the parameter values, capital account opening and capital control, the results are the same, there is no change. It seems that the introduced capital control does not work, do you know what causes this?
Will appreciate any advice.
Here are the revised UIP conditions of the two countries. Specifically, I introduced capital controls based on Chang(2015) in my home country, and changed the value of parameter “omegah_h” to indicate different capital account openness degrees, while foreign countries did not introduce capital control.
home UIP condition
foreign UIP condition
% home UIP condition
r_h-r_f = de(+1)+omegah_h * psi_ba_h * psi_h;
% foreign UIP condition
-de(+1)= r_f - r_h - chi_B*b_f;