Capital Flows to Brazil: The Endogeneity of Capital Controls

48 Pages Posted: 16 Sep 1998

See all articles by Eliana Cardoso

Eliana Cardoso

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS); National Bureau of Economic Research (NBER)

Ilan Goldfajn

Gávea Investimentos; Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics; Central Bank of Brazil

Multiple version iconThere are 2 versions of this paper

Date Written: September 1997

Abstract

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.

JEL Classification: F32, F41

Suggested Citation

Cardoso, Eliana and Goldfajn, Ilan, Capital Flows to Brazil: The Endogeneity of Capital Controls (September 1997). IMF Working Paper No. 97/115. Available at SSRN: https://ssrn.com/abstract=128088 or http://dx.doi.org/10.2139/ssrn.128088

Eliana Cardoso

Georgetown University - Edmund A. Walsh School of Foreign Service (SFS)

Washington, DC 20057
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Ilan Goldfajn (Contact Author)

Gávea Investimentos ( email )

Rua Dias Ferreira, 190 7th andar
22431-050 Rio de Janeiro
Brazil

Pontifical Catholic University of Rio de Janeiro (PUC-Rio) - Department of Economics ( email )

Rua Marques de Sao Vicente, 225/206F
Rio de Janeiro, RJ 22453
Brazil

Central Bank of Brazil ( email )

P.O. Box 08670
SBS Quadra 3 Bloco B - Edificio-Sede
Brasilia DF 70074-900, Distr. Federal 70074-900
Brazil
61-4143232 (Phone)
61-2260767 (Fax)

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