Price-based capital account regulations: the Colombian experience
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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- 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 63_2010, Instituto de Economía, Universidad Argentina de la Empresa.
- Salvador ValdÃ©s-Prieto & Marcelo Soto, 1998. "The Effectiveness of Capital Controls: Theory and Evidence from Chile," Empirica, Springer, vol. 25(2), pages 133-164, January.
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