Controls on Capital Inflows and External Shocks

26 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 attempts to analyze whether price-based controls on capital inflows are successful in insulating economies against external shocks. He presents results from vector auto regressive (VAR) models that indicate that Chile and Colombia, countries that adopted controls on capital inflows, seem to have been relatively well insulated against external disturbances. Subsequently, he uses the auto regressive distributed lag (ARDL) approach to co-integration to isolate the effects of the capital controls on the pass-through of external disturbances to domestic interest rates in those economies. The author concludes that there is evidence that the capital controls allowed for greater policy autonomy.

Keywords: Macroeconomic Management, Economic Theory & Research, Economic Stabilization, Capital Flows, Financial Economics

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

Suggested Citation

David, Antonio C., Controls on Capital Inflows and External Shocks (March 1, 2007). World Bank Policy Research Working Paper No. 4176, Available at SSRN: https://ssrn.com/abstract=975847

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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