Are Price-Based Capital Account Regulations Effective in Developing Countries?

27 Pages Posted: 20 Apr 2016

See all articles by Antonio C. David

Antonio C. David

World Bank - Policy Research Department; International Monetary Fund (IMF)

Date Written: March 1, 2007

Abstract

The author evaluates the effectiveness of policy measures adopted by Chile and Colombia, aiming to mitigate the deleterious effects of pro-cyclical capital flows. In the case of Chile, according to his Generalized Method of Moments (GMM) analysis, capital controls succeeded in reducing net short-term capital flows but did not affect long-term flows. As far as Colombia is concerned, the regulations were capable of affecting total flows and also long-term ones. In addition, the co-integration models indicate that the regulations did not have a direct effect on the real exchange rate in the Chilean case. Nonetheless, the model used for Colombia did detect a direct impact of the capital controls on the real exchange rate. Therefore, the results do not seem to support the idea that those regulations were easily evaded.

Keywords: Capital Flows, Capital Controls, Developing Countries

JEL Classification: E60, O16, O54, F33, F34

Suggested Citation

David, Antonio C., Are Price-Based Capital Account Regulations Effective in Developing Countries? (March 1, 2007). World Bank Policy Research Working Paper No. 4175, Available at SSRN: https://ssrn.com/abstract=975846

Antonio C. David (Contact Author)

World Bank - Policy Research Department ( email )

1818 H Street
Washington, DC 20433
United States

International Monetary Fund (IMF) ( email )

700 19th Street N.W.
Washington, DC 20431
United States

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