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Title: Are price-based capital account regulations effective? : evidence from the experiences of Brazil, Chile and Colombia in the 1990s
Author: David, A. C.
Awarding Body: University of Cambridge
Current Institution: University of Cambridge
Date of Award: 2005
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Abstract:
Large and volatile capital flows pose serious challenges for macroeconomic management in developing countries. Our main objective in the first chapter is to assess both the role of capital controls in helping to prevent financial instability, and there adequacy for the management of financial stress. We consider theoretical approaches that introduce distortions to capital markets, moral hazards, information asymmetries, bounded rationality and endogenous financial instability, making a strong case for the use of capital account management policies. Furthermore, we analyse whether dollarisation could help to deliver financial stability and therefore constitute an alternative to capital controls. In the second chapter, we examine the price-based capital account management policies adopted in the 1990s by Chile, Colombia and Brazil. In addition, we evaluate the effectiveness of those regulations, concentrating on their impact on net capital flows, on the maturity structure of flows and on the real exchange rate. In the case of Chile, according to our analysis and evidence capital controls succeeded in reducing net short-term flows; however, they did not affect long-term flows or the real exchange rate. As far as Colombia is concerned, the regulations seem to have been more effective, as they were capable of reducing not only short-term flows but also long-term ones, as well as affecting the real exchange rate. In turn, in the case of Brazil, taxes on inflows were only directed at portfolio inflows and the evidence shows that they succeeded in having a significant impact on them. Finally, in the third chapter, we analyse whether price-based controls on capital inflows were successful in insulating these economies against external shocks. Our results indicate that capital controls did help to shield Chile and Colombia against external disturbances in the 1990s. We conclude that the experiences of Chile, Colombia and Brazil present strong evidence that capital account regulations help to provide greater policy autonomy.
Supervisor: Not available Sponsor: Not available
Qualification Name: Thesis (Ph.D.) Qualification Level: Doctoral
EThOS ID: uk.bl.ethos.598309  DOI: Not available
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