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Beyond capital controls: regulation of foreign currency derivatives markets in the Republic of Korea and Brazil after the global financial crisis

Author

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  • Prates, Daniela Magalhães
  • Fritz, Barbara

Abstract

Within the management of capital flows, some emerging economies have been facing economic policy dilemmas after the global financial crisis, related to financial instrument operations, in a context of abundant liquidity in the advanced economies. However, neither the academic literature nor the financial institutions have paid sufficient attention to foreign currency (FX) derivatives regulation in emerging economies. This paper analyses the measures adopted by Brazil and the Republic of Korea. We find, first, that the breadth of regulation concerning FX derivatives operations depends on the actors involved and the type of contract used. Second, effective domestic institutions are needed to formulate and implement regulations. Third, countries should not limit their policy space through multilateral or bilateral agreements, and leave space for domestic financial regulation.

Suggested Citation

  • Prates, Daniela Magalhães & Fritz, Barbara, 2016. "Beyond capital controls: regulation of foreign currency derivatives markets in the Republic of Korea and Brazil after the global financial crisis," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), April.
  • Handle: RePEc:ecr:col070:40433
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    References listed on IDEAS

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    1. Nicolas Magud & Carmen Reinhart & Kenneth Rogoff, 2005. "Capital Controls: Myth and Reality A Portfolio Balance Approach to Capital Controls," University of Oregon Economics Department Working Papers 2006-10, University of Oregon Economics Department.
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    3. John Williamson, 2005. "Curbing the Boom-Bust Cycle: Stabilizing Capital Flows to Emerging Markets," Peterson Institute Press: Policy Analyses in International Economics, Peterson Institute for International Economics, number pa75, January.
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    5. Juan Antonio Montecino & Jose Antonio Cordero, 2010. "Capital Controls and Monetary Policy in Developing Countries," CEPR Reports and Issue Briefs 2010-10, Center for Economic and Policy Research (CEPR).
    6. Olivier Jeanne & Arvind Subramanian & John Williamson, 2012. "Who Needs to Open the Capital Account?," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 5119.
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    10. Ventura, André & Garcia, Marcio Gomes Pinto, 2012. "Mercados futuro e à vista de câmbio no Brasil: O rabo balança o cachorro," Revista Brasileira de Economia - RBE, FGV/EPGE - Escola Brasileira de Economia e Finanças, Getulio Vargas Foundation (Brazil), vol. 66(1), March.
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    More about this item

    Keywords

    MOVIMIENTOS DE CAPITAL; CONTROL DE CAMBIOS; VALORES DE DERIVADOS; DIVISAS; CRISIS FINANCIERA; CAPITAL MOVEMENTS; FOREIGN EXCHANGE CONTROL; DERIVATIVE SECURITIES; FOREIGN EXCHANGE; FINANCIAL CRISIS;

    JEL classification:

    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics

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