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The Chilean-Style of Capital Controls: an Empirical Assessment


  • Heriberto Tapia
  • Ricardo Ffrench-Davis


In this paper we review the main features of the Chilean-Style of capital controls during the nineties. In particular, we analyze empirically the effectiveness of the unremunerated reserve requirement (URR) in three key areas: its capacity to open space for monetary policy, its influence on the maturity profile of foreign liabilities, and its effect on the volume of capital flows. Our results suggest that the application of the URR was successful in those three fields, despite the existence of elusion and evasion in the application of the instrument. We conclude that the Chilean experience could be useful for other emerging countries facing capital surges and highlight some specific advantages and relevant shortcomings of the Chilean model.

Suggested Citation

  • Heriberto Tapia & Ricardo Ffrench-Davis, 2004. "The Chilean-Style of Capital Controls: an Empirical Assessment," Econometric Society 2004 Latin American Meetings 255, Econometric Society.
  • Handle: RePEc:ecm:latm04:255

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    References listed on IDEAS

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    5. Gopal Das Varma, 2002. "Standard Auctions with Identity-Dependent Externalities," RAND Journal of Economics, The RAND Corporation, vol. 33(4), pages 689-708, Winter.
    6. Pashigian, B Peter & Gould, Eric D, 1998. "Internalizing Externalities: The Pricing of Space in Shopping Malls," Journal of Law and Economics, University of Chicago Press, vol. 41(1), pages 115-142, April.
    7. Ilya Segal, 1999. "Contracting with Externalities," The Quarterly Journal of Economics, Oxford University Press, vol. 114(2), pages 337-388.
    8. Roger B. Myerson, 1981. "Optimal Auction Design," Mathematics of Operations Research, INFORMS, vol. 6(1), pages 58-73, February.
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    Cited by:

    1. 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).

    More about this item


    capital controls; capital flows; Chile; encaje; reserve requirement;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements


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