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Capital controls in Brazil – Stemming a tide with a signal?


  • Jinjarak, Yothin
  • Noy, Ilan
  • Zheng, Huanhuan


Controls on capital inflows have been experiencing a renaissance since 2008, with several prominent emerging markets implementing them in recent years. We focus on Brazil, which instituted five changes in its capital account regime in 2008–2011. Using the synthetic control method, we construct counterfactuals (i.e., Brazil with no policy change) for each of these changes. We find no evidence that any tightening of controls was effective in reducing the magnitudes of capital inflows, but we observe some modest and short-lived success in preventing further declines in inflows when the capital controls were relaxed. We hypothesize that price-based capital controls’ only perceptible effect is to be found in the content of the signal they broadcast regarding the government’s larger intentions and sensibilities. In the case of Brazil, its left-of-center government’s willingness to remove controls was perceived as a noteworthy indication that the government was not as hostile to the international financial markets as many expected it to be.

Suggested Citation

  • Jinjarak, Yothin & Noy, Ilan & Zheng, Huanhuan, 2013. "Capital controls in Brazil – Stemming a tide with a signal?," Journal of Banking & Finance, Elsevier, vol. 37(8), pages 2938-2952.
  • Handle: RePEc:eee:jbfina:v:37:y:2013:i:8:p:2938-2952 DOI: 10.1016/j.jbankfin.2013.04.007

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    References listed on IDEAS

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    More about this item


    Capital control; Brazil; Global financial crisis; Mutual fund flows; Exchange rate;

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • G23 - Financial Economics - - Financial Institutions and Services - - - Non-bank Financial Institutions; Financial Instruments; Institutional Investors
    • E60 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General


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