Controls on Capital Inflows: Do They Work?
Jose De Gregorio
Central Bank of Chile; Universidad de Chile; National Bureau of Economic Research (NBER)
University of California, Los Angeles (UCLA) - Global Economics and Management (GEM) Area; National Bureau of Economic Research (NBER)
Central Bank of Chile; Ministry of Finance, Chile
NBER Working Paper No. w7645
This paper analyzes the effectiveness of capital controls, in particular the Chilean experience with the use of the unremunerated reserve requirement. We examine the effects on interest rates, real exchange rate, and the volume and composition of capital inflows. The effects are elusive and it is difficult to pin down long-run effects. Although after the unremunerated reserve requirement was introduced there was an increase in the interest rate differential, the econometric evidence does not show it has a significant long-run effect on interest rate differentials. There are also no effects on the real exchange rate. However, the more persistent and significant effect is on the composition of capital inflows, tilting composition toward longer maturity.
Number of Pages in PDF File: 35working papers series
Date posted: May 21, 2000
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