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Capital Flows to Brazil: The Endogeneity of Capital Controls

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  • Eliana Cardoso

    (International Monetary Fund)

  • Ilan Goldfajn

    (International Monetary Fund)

Abstract

This paper creates an index of capital controls to analyze the determinants of capital flows to Brazil, accounting for the endogeneity of capital controls by considering a government that sets controls in response to capital flows. It finds that the government reacts strongly to capital flows by increasing controls on inflows during booms and relaxing them in moments of distress. The paper estimates a vector autoregression with capital flows, controls, and interest differentials. It shows that controls have been temporarily effective in altering levels and composition of capital flows but have had no sustained effects in the long run.

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Bibliographic Info

Article provided by Palgrave Macmillan in its journal Staff Papers - International Monetary Fund.

Volume (Year): 45 (1998)
Issue (Month): 1 (March)
Pages: 161-202

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Handle: RePEc:pal:imfstp:v:45:y:1998:i:1:p:161-202

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References

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  1. Cardenas, Mauricio & Barrera, Felipe, 1997. "On the effectiveness of capital controls: The experience of Colombia during the 1990s," Journal of Development Economics, Elsevier, Elsevier, vol. 54(1), pages 27-57, October.
  2. Marcio G. P. Garcia & Alexandre Barcinski, 1996. "Capital flows to Brazil in the nineties: Macroeconomic aspects and the effectiveness of capital controls," Textos para discussão, Department of Economics PUC-Rio (Brazil) 357, Department of Economics PUC-Rio (Brazil).
  3. Claessens, Stijn & Dooley, Michael P & Warner, Andrew, 1995. "Portfolio Capital Flows: Hot or Cold?," World Bank Economic Review, World Bank Group, World Bank Group, vol. 9(1), pages 153-74, January.
  4. Ilan Goldfajn & Rodrigo O. Valdes, 1996. "The Aftermath of Appreciations," NBER Working Papers 5650, National Bureau of Economic Research, Inc.
  5. R. B. Johnston & Chris Ryan, 1994. "The Impact of Controlson Capital Movementson the Private Capital Accounts of Countries' Balance of Payments," IMF Working Papers, International Monetary Fund 94/78, International Monetary Fund.
  6. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1993. "Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors," IMF Staff Papers, Palgrave Macmillan, vol. 40(1), pages 108-151, March.
  7. Dooley, Michael P, 1996. "Capital Controls and Emerging Markets," International Journal of Finance & Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 1(3), pages 197-205, July.
  8. Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1996. "Inflows of Capital to Developing Countries in the 1990s," Journal of Economic Perspectives, American Economic Association, American Economic Association, vol. 10(2), pages 123-139, Spring.
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