The real effects of capital controls: Firm-level evidence from a policy experiment

Laura Alfaro, Anusha Chari and Fabio Kanczuk

Journal of International Economics, 2017, vol. 108, issue C, 191-210

Abstract: This paper evaluates the effects of capital controls on firm-level stock returns and real investment using data from Brazil. On average, there is a statistically significant drop in cumulative abnormal returns consistent with an increase in the cost of capital for Brazilian firms following capital control announcements. Large firms and the largest exporting firms appear less negatively affected compared to external-finance-dependent firms, and capital controls on equity inflows have a more negative announcement effect on equity returns than those on debt inflows. Overall, the findings have implications for macro-finance models that abstract from heterogeneity at the firm level to examine the optimality of capital control taxation.

Keywords: Capital controls; Discriminatory taxation; International investment barriers; Cost of capital; Exports (search for similar items in EconPapers)
JEL-codes: F3 F4 G1 H22 L2 (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (75)

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Related works:
Working Paper: The Real Effects of Capital Controls: Firm-Level Evidence from a Policy Experiment (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:inecon:v:108:y:2017:i:c:p:191-210

DOI: 10.1016/j.jinteco.2017.06.004

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