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Microeconomic Effects of Capital Controls: The Chilean Experience During the 1990s

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  • Francisco A. Gallego F
  • Leonardo Hernández

Abstract

This paper studies the experience with the use of capital controls in Chile during the 1990s. Rather than revisiting previous studies, it complements previous research by providing, for the first time, empirical evidence on some of the microeconomic effects of capital controls, in particular, the unremunerated reserve requirement (URR). By looking at financial statements for a group of 73 Chilean firms during 1986-2001, the paper attempts to identify the effects of the URR on the firms’ costs and ways of financing. Chilean firms are grouped by economic sector, size and access to international capital markets. Results show that the effects of the URR are firm specific; forinstance, there are striking differences in the response to the URR among firms of different size and those with or without access to international capital markets.

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Bibliographic Info

Paper provided by Central Bank of Chile in its series Working Papers Central Bank of Chile with number 203.

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Date of creation: Feb 2003
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Handle: RePEc:chb:bcchwp:203

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  2. Montiel, Peter & Reinhart, Carmen M., 1999. "Do capital controls and macroeconomic policies influence the volume and composition of capital flows? Evidence from the 1990s," Journal of International Money and Finance, Elsevier, vol. 18(4), pages 619-635, August.
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  14. Marcelo Soto & Salvador Valdés, 1996. "¿Es el Control Selectivo de Capitales Efectivo en Chile? Su Efecto sobre el Tipo de Cambio Real," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 33(98), pages 77-108.
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Blog mentions

As found by EconAcademics.org, the blog aggregator for Economics research:
  1. En defensa de los controles de capital
    by Eduardo Levy-Yeyati in Foco Económico on 2010-12-15 12:00:00
Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
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Cited by:
  1. Vithessonthi, Chaiporn & Tongurai, Jittima, 2013. "Unremunerated reserve requirements, exchange rate volatility, and firm value," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 358-378.
  2. Oscar Landerretche, 2007. "Job flows in chile," Working Papers, University of Chile, Department of Economics wp240, University of Chile, Department of Economics.
  3. Kristin J. Forbes, 2007. "The Microeconomic Evidence on Capital Controls: No Free Lunch," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 171-202 National Bureau of Economic Research, Inc.
  4. Vithessonthi, Chaiporn & Tongurai, Jittima, 2013. "The perils of a central bank's capital control: How substantial is the effect on firm value?," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 23(C), pages 111-135.
  5. Henry, Peter B., 2006. "Capital Account Liberalization: Theory, Evidence, and Speculation," Research Papers 1951, Stanford University, Graduate School of Business.
  6. Forbes, Kristin J., 2003. "One Cost of the Chilean Capital Controls: Increased Financial Constraints for Smaller Traded Firms," Working papers 4273-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
  7. Dmytro Boyarchuk & Inna Golodniuk & Mykyta Mykhaylychenko & Wojciech Paczynski & Anna Tsarenko & Vitaly Vavryschuk, 2006. "Prospects for EU-Ukraine Economic Relations," CASE Network Reports 0066, CASE-Center for Social and Economic Research.
  8. Karl Friedrich Habermeier & Annamaria Kokenyne & Chikako Baba, 2011. "The Effectiveness of Capital Controls and Prudential Policies in Managing Large Inflows," IMF Staff Discussion Notes 11/14, International Monetary Fund.
  9. Hartwell, Christopher A., 2011. "All That’s Old is New Again: Capital Controls and the Macroeconomic Determinants of Entrepreneurship in Emerging Markets," MPRA Paper 40257, University Library of Munich, Germany.
  10. Peter Henry, 2007. "Capital Account Liberalization: Theory, Evidence, and Speculation," Discussion Papers, Stanford Institute for Economic Policy Research 07-004, Stanford Institute for Economic Policy Research.
  11. Jonathan David Ostry & Atish R. Ghosh & Karl Friedrich Habermeier & Marcos Chamon & Mahvash Saeed Qureshi & Dennis B. S. Reinhardt, 2010. "Capital Inflows," IMF Staff Position Notes 2010/04, International Monetary Fund.

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