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Price-based capital account regulations: the Colombian experience

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  • José Antonio Ocampo

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  • Camilo Ernesto Tovar

Abstract

The Chilean experience with price-based capital account regulations (i.e., deposits or reserve requirements on capital inflows) has been subject to extensive discussion in the recent literature. This paper presents evidence on the effectiveness of similar regulations in Colombia since September 1993, when traditional exchange controls were replaced by price-based regulations. It is important to emphasize that the Tobin tax equivalent of such regulations in Colombia has been quite high (13.6% and 6.4% tax for 12 and 36 months loans, respectively, in 1994-1998), and, as in Chile, it is certainly much higher than the rates suggested for an international Tobin tax. The econometric evidence presented indicates that these regulations have been effective in Colombia, both in terms of reducing the volume of flows and in improving the term structure of external borrowing. This indicates that price-based regulations give the authorities some room for maneuver to adopt restrictive monetary policies during international capital market booms. They have also been effective in improving the debt profile of the country, a crucial determinant of macroeconomic risks in the face of busts in the international capital market.

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Bibliographic Info

Paper provided by CEPAL NACIONES UNIDAS in its series DOCUMENTOS DE INVESTIGACION with number 003372.

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Length: 39
Date of creation: 30 Oct 1999
Date of revision:
Handle: RePEc:col:000140:003372

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  1. Salvador Valdés-Prieto & Marcelo Soto, 1998. "The Effectiveness of Capital Controls: Theory and Evidence from Chile," Empirica, Springer, Springer, vol. 25(2), pages 133-164, January.
  2. Chisari, Omar & Ferro, Gustavo & González, Mariano & León, Sonia & Maquieryra, Javier & Mastronardi, Leonardo & Roitman, Mauricio & Romero, Carlos & Theller, Ricardo, 2010. "Modelo de Equilibrio General Computado para la Argentina 2006," UADE Textos de Discusión, Instituto de Economía, Universidad Argentina de la Empresa 63_2010, Instituto de Economía, Universidad Argentina de la Empresa.
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Cited by:
  1. Ocampo, Jose Antonio, 2002. "Capital-Account and Counter-Cyclical Prudential Regulations in Developing Countries," Working Paper Series, World Institute for Development Economic Research (UNU-WIDER) UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  2. José Antonio OCAMPO, 2001. "Recasting The International Financial Agenda," G-24 Discussion Papers, United Nations Conference on Trade and Development 13, United Nations Conference on Trade and Development.
  3. Leonardo Villar & Hernán Rincón, . "The Colombian Economy in the nineties: Capital Flows and Foreign Exchange Regimes," Borradores de Economia, Banco de la Republica de Colombia 149, Banco de la Republica de Colombia.
  4. Antonio David, 2009. "Are price-based capital account regulations effective in developing countries?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 41(26), pages 3375-3388.
  5. Concha, Alvaro & Galindo, Arturo José & Vasquez, Diego, 2011. "An assessment of another decade of capital controls in Colombia: 1998–2008," The Quarterly Review of Economics and Finance, Elsevier, Elsevier, vol. 51(4), pages 319-338.
  6. José Darío Uribe, 2005. "Capital controls and foreign exchange market intervention in Colombia," BIS Papers chapters, Bank for International Settlements, in: Bank for International Settlements (ed.), Globalisation and monetary policy in emerging markets, volume 23, pages 128-40 Bank for International Settlements.

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