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