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Price-based capital account regulations: the Colombian experience

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  • José Antonio Ocampo

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  • Camilo Ernesto Tovar

Abstract

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.

Suggested Citation

  • José Antonio Ocampo & Camilo Ernesto Tovar, 1999. "Price-based capital account regulations: the Colombian experience," Documentos de Investigación 003372, Cepal Naciones Unidas.
  • Handle: RePEc:col:000140:003372
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    1. Macedo, Roberto B.M., 2003. "Macroeconomic volatility and social vulnerability in Brazil: the Cardoso government (1995-2002) and perspectives," Financiamiento para el Desarrollo 132, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    2. Fox, M. Louise & Palmer, Edward, 2001. "Pension reform in Europe in the 90's and lessons for Latin America," Financiamiento para el Desarrollo 114, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    3. Willmore, Larry, 2006. "Non-contributory pensions: Bolivia and Antigua in an international context," Financiamiento para el Desarrollo 167, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    4. Tovar, Camilo Ernesto & Ocampo, José Antonio & Sánchez Torres, Fabio, 2000. "The labour market and income distribution in Colombia in the 1990s," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    5. José Antonio Ocampo, 2000. "Recasting the International Financial Agenda," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2000-18, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    6. Guillermo Cruces & Quentin Wodon, 2007. "Risk-adjusted poverty in Argentina: measurement and determinants," Journal of Development Studies, Taylor & Francis Journals, vol. 43(7), pages 1189-1214.
    7. Ocampo, José Antonio, 1999. "International financial reform: the broad agenda," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), December.
    8. Studart, Rogério, 2000. "Pension funds and the financing productive investment: an analysis based on Brazil's recent experience," Financiamiento para el Desarrollo 102, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    9. -, 2002. "Growth with stability: financing for development in the new international context," Libros de la CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 67 edited by Eclac.
    10. Antonio David, 2009. "Are price-based capital account regulations effective in developing countries?," Applied Economics, Taylor & Francis Journals, vol. 41(26), pages 3375-3388.
    11. Ocampo, José Antonio, 2003. "Capital-account and counter-cyclical prudential regulations in developing countries," Copublicaciones, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), number 1796.
    12. González R., Marino J., 2001. "Reformas del sistema de salud en Venezuela (1987-1999): balance y perspectivas," Financiamiento para el Desarrollo 111, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    13. Cruces, Guillermo & Galiani, Sebastian, 2007. "Fertility and female labor supply in Latin America: New causal evidence," Labour Economics, Elsevier, vol. 14(3), pages 565-573, June.
    14. José Darío Uribe, 2005. "Capital controls and foreign exchange market intervention in Colombia," BIS Papers chapters, in: Bank for International Settlements (ed.),Globalisation and monetary policy in emerging markets, volume 23, pages 128-40, Bank for International Settlements.
    15. Titelman Kardonsky, Daniel & Vera, Cecilia, 2009. "A summary of the experiences of Chile and Colombia with unremunerated reserve requirements on capital flows during the 1990's," Financiamiento para el Desarrollo 221, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    16. Calcagno, Alfredo Fernando & Manuelito, Sandra & Titelman Kardonsky, Daniel, 2003. "From hard-peg to hard landing?: recent experiences of Argentina and Ecuador," Financiamiento para el Desarrollo 125, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    17. Gabriel Palma, 2000. "The Three Routes to Financial Crises: The Need for Capital Controls," SCEPA working paper series. SCEPA's main areas of research are macroeconomic policy, inequality and poverty, and globalization. 2000-17, Schwartz Center for Economic Policy Analysis (SCEPA), The New School.
    18. Paddison, Oliver, 2006. "Social security in the english-speaking Caribbean," Financiamiento para el Desarrollo 178, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    19. Leonardo Villar & Hernán Rincón, 2000. "The Colombian Economy in the nineties: Capital Flows and Foreign Exchange Regimes," Borradores de Economia 149, Banco de la Republica de Colombia.
    20. Palmer, Edward, 2006. "Public policy for pensions, health and sickness insurance: potential lessons from Sweden for Latin America," Financiamiento para el Desarrollo 179, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL).
    21. 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, vol. 51(4), pages 319-338.
    22. Moguillansky, Graciela, 2002. "Investment and financial volatility in Latin America," Revista CEPAL, Naciones Unidas Comisión Económica para América Latina y el Caribe (CEPAL), August.

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