Microeconomic Effects of Capital Controls: The Chilean Experience During the 1990s
Central Bank of Chile Working Paper No. 203
41 Pages Posted: 18 Jun 2003
Date Written: February 2003
This paper studies the experience with the use of capital controls in Chile during the 1990s. Rather than revisiting previous studies, it complements previous research by providing, for the first time, empirical evidence on some of the microeconomic effects of capital controls, in particular, the unremunerated reserve requirement (URR). By looking at financial statements for a group of 73 Chilean firms during 1986-2001, the paper attempts to identify the effects of the URR on the firms' costs and ways of financing. Chilean firms are grouped by economic sector, size and access to international capital markets. Results show that the effects of the URR are firm specific; for instance, there are striking differences in the response to the URR among firms of different size and those with or without access to international capital markets.
Keywords: Capital controls, financial structure, Chile
JEL Classification: E52, G32
Suggested Citation: Suggested Citation