Capital Flows to Brazil: The Endogeneity of Capital Controls

Author/Editor:

Eliane A. Cardoso ; Ilan Goldfajn

Publication Date:

September 1, 1997

Electronic Access:

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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 creates an index of capital controls to analyze the determinants of capital flows to Brazil, accounting for the endogeneity of capital controls by considering a government that sets controls in response to capital flows. It finds that the government reacts strongly to capital flows by increasing controls on inflows during booms and relaxing them in moments of distress. The paper estimates a vector autoregression with capital flows, controls, and interest differentials. It shows that controls have been temporarily effective in altering levels and composition of capital flows but have had no sustained effects in the long run.

Series:

Working Paper No. 1997/115

Subject:

Balance of payments Capital controls Capital flows Capital inflows Capital outflows Private capital flows

Notes:

Also published in Staff Papers, Vol. 45, No. 1, March 1998.

English

Publication Date:

September 1, 1997

ISBN/ISSN:

9781451942989/1018-5941

Stock No:

WPIEA1151997

Pages:

48

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