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Effectiveness of Capital Controls in Selected Emerging Markets in the 2000's

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  • Chikako Baba
  • Annamaria Kokenyne

Abstract

This paper estimates the effectiveness of capital controls in response to inflow surges in Brazil, Colombia, Korea, and Thailand in the 2000s. Controls are generally associated with a decrease in inflows and a lengthening of maturities, but the relationship is not statistically significant in all cases, and the effects are temporary. Controls are more successful in providing room for monetary policy than dampening currency appreciation pressures. We argue that the macroeconomic impact of capital controls depends on the extensiveness of the policy, the level of capital market development, the support provided by other policies, and the persistence of capital flows.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 11/281.

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Length: 45
Date of creation: 01 Dec 2011
Date of revision:
Handle: RePEc:imf:imfwpa:11/281

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Keywords: Capital controls; Private capital flows; Capital inflows; capital flows; net capital flows; current account balance; net capital; exchange rates; capital control; foreign exchange; capital transactions; private capital; capital market; capital outflows; capital markets; capital inflow; financial markets; determinants of capital flows; international capital flows; capital flow; capital movements; debt securities; hedging; foreign capital; international financial; capital outflow; stock market; capital account transactions; equity investments; global financial crisis; international financial statistics; equity inflows; international capital; capital market development; global financial stability; securities trading; international borrowing; export revenues; commercial credits; determinants of capital flow; domestic capital; foreign trade; spot market; liberalization of capital; consumer price index; gross domestic product; current account deficit; commodity prices; movement of capital; private investors; domestic bonds; strong capital inflows; risk aversion; equity prices; securities companies; global liquidity; domestic capital market; equity investment; capital accounts; stock exchange; capital account restrictions;

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References

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  1. Nicolas Magud & Carmen M. Reinhart, 2006. "Capital Controls: An Evaluation," NBER Working Papers 11973, National Bureau of Economic Research, Inc.
  2. 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.
  3. David, Antonio C., 2007. "Revisiting Price-based Controls on Capital Inflows in a "Sophisticated" Emerging Market," World Development, Elsevier, Elsevier, vol. 35(8), pages 1329-1340, August.
  4. 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.
  5. Bruno Coelho & Kevin Gallagher, 2010. "Capital Controls and 21st Century Financial Crises: Evidence from Colombia and Thailand," Working Papers, Political Economy Research Institute, University of Massachusetts at Amherst wp213, Political Economy Research Institute, University of Massachusetts at Amherst.
  6. De Gregorio, Jose & Edwards, Sebastian & Valdes, Rodrigo O., 2000. "Controls on capital inflows: do they work?," Journal of Development Economics, Elsevier, Elsevier, vol. 63(1), pages 59-83, October.
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Citations

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Cited by:
  1. Patnaik, Ila & Malik, Sarat & Pandey, Radhika & Prateek, 2013. "Foreign investment in the Indian Government bond market," Working Papers, National Institute of Public Finance and Policy 13/126, National Institute of Public Finance and Policy.
  2. Forbes, Kristin J. & Fratzscher, Marcel & Kostka, Thomas & Straub, Roland, 2012. "Bubble thy neighbor: portfolio effects and externalities from capital controls," Proceedings, Federal Reserve Bank of San Francisco, Federal Reserve Bank of San Francisco, issue Nov, pages 1-48.
  3. Rudiger Ahrend & Antoine Goujard & Cyrille Schwellnus, 2012. "International Capital Mobility: Which Structural Policies Reduce Financial Fragility?," OECD Economic Policy Papers 2, OECD Publishing.
  4. Barbara Fritz & Daniela Prates, 2013. "Beyond capital controls: the regulation of foreign currency derivatives markets in South Korea and Brazil after the global financial crisis," Competence Centre on Money, Trade, Finance and Development, Hochschule fuer Technik und Wirtschaft, Berlin 1307, Hochschule fuer Technik und Wirtschaft, Berlin.
  5. Ila Patnaik & Ajay Shah, 2012. "Did the Indian Capital Controls Work as a Tool of Macroeconomic Policy?," IMF Economic Review, Palgrave Macmillan, Palgrave Macmillan, vol. 60(3), pages 439-464, September.
  6. Davis, Scott & Presno, Ignacio, 2014. "Capital controls as an instrument of monetary policy," Globalization and Monetary Policy Institute Working Paper, Federal Reserve Bank of Dallas 171, Federal Reserve Bank of Dallas.
  7. John Beirne & Christian Friedrich, 2014. "Capital Flows and Macroprudential Policies - A Multilateral Assessment of Effectiveness and Externalities," Working Papers, Bank of Canada 14-31, Bank of Canada.
  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. Jinjarak, Yothin & Noy, Ilan & Zheng, Huanhuan, 2013. "What Lessons Can Asia Draw from Capital Controls in Brazil during 2008–2012?," ADBI Working Papers, Asian Development Bank Institute 423, Asian Development Bank Institute.

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