Ineffective controls on capital inflows under sophisticated financial markets
Subtitle: Brazil in the nineties
By: Bernardo S. de M. Carvalho, Márcio G. P. Garcia.
Contributors: Garcia, Márcio Gomes Pinto.; National Bureau of Economic Research.
Series: NBER working paper series -- no. 12283.; Working paper series (National Bureau of Economic Research) -- working paper no. 12283.
Publisher: National Bureau of Economic Research
Published: 2006
Place of publication: Cambridge, Mass
Language: eng
Number of pages: 41
Subjects: Investments, Foreign -- Brazil -- Econometric models; Fiscal policy -- Brazil
Description: "We analyze the Brazilian experience in the 1990s to access the effectiveness of controls on capital inflows in restricting financial inflows and changing their composition towards long term flows.  Econometric exercises (VARs) showed that controls on capital inflows were effective in deterring financial inflows for only a brief period, from two to six months.  The hypothesis to explain the ineffectiveness of the controls is that financial institutions performed several operations aimed at avoiding capital controls.  To check this hypothesis, we conducted interviews with market players.  We collected several examples of the financial strategies engineered to avoid the capital controls and invest in the Brazilian fixed income market.  The main conclusion is that controls on capital inflows, while they may be desirable, are of very limited effectiveness under sophisticated financial markets"--National Bureau of Economic Research web site.
Notes: "May 2006."

Includes bibliographical references (p. 37-40).

Also available in PDF from the NBER world wide web site (www.nber.org).