## Capital Flows to Brazil: The Endogeneity of Capital Controls

_IMF Working Papers, September 1, 1997_

## Source details

**Canonical URL:** [Capital Flows to Brazil: The Endogeneity of Capital Controls](https://www.imf.org/en/publications/wp/issues/2016/12/30/capital-flows-to-brazil-the-endogeneity-of-capital-controls-2334)

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## Bibliographic details
- Authors: Eliane A. Cardoso, Ilan Goldfajn
- Published: September 1, 1997
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781451942989.001

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### Research question and scope
- Examines determinants of capital flows to Brazil while accounting for the endogeneity of capital controls by modeling a government that sets controls in response to capital flows.
- Focuses on private capital flows, capital inflows, capital outflows, and the interaction with capital control measures and interest differentials.

### Data and methodology
- Constructs an index of capital controls for Brazil.
- Estimates a vector autoregression (VAR) with:
  - capital flows,
  - controls,
  - interest differentials.
- Publication details:
  - Authors: Eliane A. Cardoso, Ilan Goldfajn
  - Date: September 1, 1997
  - Pages: 48
  - Volume: 1997
  - Issue: 115
  - Series: Working Paper No. 1997/115
  - DOI: https://doi.org/10.5089/9781451942989.001
  - Stock No: WPIEA1151997
  - ISBN: 9781451942989
  - ISSN: 1018-5941

### Key findings
- The government reacts strongly to capital flows:
  - increases controls on inflows during booms,
  - relaxes controls in moments of distress.
- Controls have been temporarily effective in altering:
  - levels of capital flows,
  - composition of capital flows.
- Controls have had no sustained effects in the long run.

### Policy implications
- Capital controls can be used as a short-term policy tool to influence the level and composition of flows.
- Reliance on controls alone is unlikely to produce long-run changes in capital flow dynamics given the lack of sustained effects identified.

*IMF Working Paper: "Capital Flows to Brazil: The Endogeneity of Capital Controls", Eliane A. Cardoso and Ilan Goldfajn, September 1, 1997 (Working Paper No. 1997/115).*

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_Source: https://www.imf.org/en/publications/wp/issues/2016/12/30/capital-flows-to-brazil-the-endogeneity-of-capital-controls-2334_