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The Real Effects of Capital Controls: Firm-Level Evidence from a Policy Experiment

Laura Alfaro (), Anusha Chari () and Fabio Kanczuk ()

No 20726, NBER Working Papers from National Bureau of Economic Research, Inc

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.

JEL-codes: F3 F4 G11 G15 L2 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ifn and nep-opm
Date: 2014-12
Note: AP CF IFM ITI
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Published as Laura Alfaro & Anusha Chari & Fabio Kanczuk, 2017. "The real effects of capital controls: Firm-level evidence from a policy experiment," Journal of International Economics, vol 108, pages 191-210.

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