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

Yothin Jinjarak, Ilan Noy and Huanhuan Zheng

Journal of Banking & Finance, 2013, vol. 37, issue 8, 2938-2952

Abstract: 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.

Keywords: Capital control; Brazil; Global financial crisis; Mutual fund flows; Exchange rate (search for similar items in EconPapers)
JEL-codes: E60 F32 G23 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (55)

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Related works:
Working Paper: Capital Controls in Brazil - Stemming a Tide with a Signal? (2013)
Working Paper: Capital Controls in Brazil – Stemming a Tide with a Signal (2012)
Working Paper: Capital Controls in Brazil: Stemming a Tide with a Signal? (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:37:y:2013:i:8:p:2938-2952

DOI: 10.1016/j.jbankfin.2013.04.007

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