Stopping hot money
While high interest rates and foreign exchange sales are the most common way of dealing with a speculative attack in the foreign exchange market, several countries resorted to capital controls during recent periods of currency market turbulence. The purpose of this study is to use daily financial data to examine four of these capital controls episodes--Brazil, 1999, Malaysia 1998, Spain 1992, and Thailand 1997. We aim to assess the extent to which the capital controls were effective in delivering the outcomes that motivated their inception in the first place. We conclude that in two of the three cases (Brazil and Thailand), the controls did not deliver much of what was intended--although, one does not observe the counterfactual. By contrast, in the case of Malaysia the controls did align closely with the priors of what controls are intended to achieve: greater interest rate and exchange rate stability and more policy autonomy.
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- Reinhart, Carmen & Montiel, Peter, 1999.
"Do capital controls influence the volume and composition of capital flows? Evidence from the 1990s,"
13710, University Library of Munich, Germany.
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Palgrave Macmillan, vol. 45(1), pages 161-202, March.
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"“Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors,"
7125, University Library of Munich, Germany.
- 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.
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95/127, International Monetary Fund.
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2754, C.E.P.R. Discussion Papers.
- Ethan Kaplan & Dani Rodrik, 2001. "Did the Malaysian Capital Controls Work?," NBER Working Papers 8142, National Bureau of Economic Research, Inc.
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- Reinhart, Carmen & Reinhart, Vincent, 1998. "“Some Lessons for Policy Makers Who Deal with the Mixed Blessing of Capital Inflows,”," MPRA Paper 7123, University Library of Munich, Germany.
- Calvo, Guillermo A & Rodriguez, Carlos Alfredo, 1977. "A Model of Exchange Rate Determination under Currency Substitution and Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 85(3), pages 617-25, June.
- Reinhart, Vincent R, 2000. "How the Machinery of International Finance Runs with Sand in Its Wheels," Review of International Economics, Wiley Blackwell, vol. 8(1), pages 74-85, February.
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