Are Price-Based Capital Account Regulations Effective in Developing Countries ? [electronic resource] / David, Antonio C.

By: David, Antonio CContributor(s): David, Antonio CMaterial type: TextTextPublication details: Washington, D.C., The World Bank, 2007Description: 1 online resource (27 p.)Subject(s): Asset Price | Balance Sheets | Bank Policy | Banks and Banking Reform | Boom-Bust Cycle | Capital Account | Capital Flows | Capital Inflows | Currencies and Exchange Rates | Debt Markets | Developing Countries | Economic Theory and Research | Emerging Economies | Emerging Markets | Exchange | Finance and Financial Sector Development | Financial Liberalization | Interest | International Capital | International Capital Markets | International Economics & Trade | Liquidity | Macroeconomic Management | Macroeconomic Volatility | Macroeconomics and Economic Growth | Monetary Policy | Moral Hazard | Private Sector Development | Real Exchange Rate | Short-Term CapitalAdditional physical formats: David, Antonio C.: Are Price-Based Capital Account Regulations Effective in Developing Countries ?Online resources: Click here to access online 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.
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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.

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