Are Capital Controls Effective in the 21st Century? The Recent Experience of Colombia

Author/Editor: Clements, Benedict J. ; Kamil, Herman
Publication Date: February 01, 2009
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
Summary: This paper assesses the effects of capital controls imposed in Colombia in 2007 on capital flows and exchange rate dynamics. The results suggest that the controls were successful in reducing external borrowing, but had no statistically significant impact on the volume of non- FDI flows as a whole. We find no evidence that restrictions to capital mobility moderated the appreciation of Colombia's currency, or increased the degree of independence of monetary policy. We also find that controls have significantly increased the volatility of the exchange rate. Additional research is needed to assess the effects of capital controls on financial stability.
Series: Working Paper No. 09/30
Subject(s): Capital controls | Colombia | Capital flows | Exchange rate appreciation | Exchange rate developments | Emerging markets | Economic models

Author's Keyword(s): Capital Controls | Capital Inflows | Exchange Rate Models.
Publication Date: February 01, 2009
Format: Paper
Stock No: WPIEA2009030 Pages: 25
US$18.00 (Academic Rate:
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