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Jinjarak, Yothin and Noy, Ilan and Zheng, Huanhuan (2013) 'Capital Controls in Brazil: Stemming a Tide with a Signal?' Journal of Banking and Finance, 37 (8). pp. 2938-2952.

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Abstract

Controls on capital inflows have been experiencing a renaissance since 2008, with several prominent emerging markets implementing them in recent years. We focus on Brazil, which instituted five changes in its capital account regime in 2008-2011. Using the synthetic control method, we construct counterfactuals (i.e., Brazil with no policy change) for each of these changes. We find no evidence that any tightening of controls was effective in reducing the magnitudes of capital inflows, but we observe some modest and short-lived success in preventing further declines in inflows when the capital controls were relaxed. We hypothesize that price-based capital controls’ only perceptible effect is to be found in the content of the signal they broadcast regarding the government’s larger intentions and sensibilities. In the case of Brazil, its left-of-center government’s willingness to remove controls was perceived as a noteworthy indication that the government was not as hostile to the international financial markets as many expected it to be.

Item Type: Journal Article
SOAS Departments & Centres: Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management
Legacy Departments > Faculty of Law and Social Sciences > School of Finance and Management > Centre for Financial and Management Studies (CeFiMS)
ISSN: 03784266
DOI (Digital Object Identifier): https://doi.org/10.1016/j.jbankfin.2013.04.007
Date Deposited: 19 Apr 2013 09:08
URI: https://eprints.soas.ac.uk/id/eprint/15892

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