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
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.
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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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