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Capital Controls: Mud in the Wheels of Market DisciplineForbes, Kristin J. 12 March 2004 (has links)
Widespread support for capital account liberalization in emerging markets has recently shifted to skepticism and even support for capital controls in certain circumstances. This sea-change in attitudes has been bolstered by the inconclusive macroeconomic evidence on the benefits of capital account liberalization. There are several compelling reasons why it is difficult to measure the aggregate impact of capital controls in very different countries. Instead, a new and more promising approach is more detailed microeconomic studies of how capital controls have generated specific distortions in individual countries. Several recent papers have used this approach and examined very different aspects of capital controls - from their impact on crony capitalism in Malaysia and on financing constraints in Chile, to their impact on US multinational behavior and the efficiency of stock market pricing. Each of these diverse studies finds a consistent result: capital controls have significant economic costs and lead to a misallocation of resources. This new microeconomic evidence suggests that capital controls are not just "sand", but rather "mud in the wheels" of market discipline
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[en] THE EFFECTIVENESS OF CAPITAL INFLOWS CONTROLS IN BRAZIL / [pt] A EFICÁCIA DOS CONTROLES DE ENTRADA DE CAPITAIS NO BRASILBERNARDO SOARES DE MIRANDA CARVALHO 31 October 2005 (has links)
[pt] Esta dissertação analisa a eficácia dos controles de
entrada de capitais em
restringir e selecionar fluxos financeiros internacionais.
A maior contribuição é o foco
nas elisões dos controles realizadas pelo mercado
financeiro e seus efeitos limitadores
na eficácia das restrições ao capital de curto prazo.
Primeiro, apresentamos uma
abordagem teórica da questão, discutindo como o controle
deveria ser implementado. O
modelo tem um arcabouço simples e considera dois tipos de
investidores: paciente e
impaciente. O primeiro (que se deseja atrair) tem maior
interesse no retorno de longo
prazo e o segundo (que não se deseja atrair) dá maior
valor a ganhos de curto prazo.
Mostramos que se o diferencial de juros é endógeno à
fixação dos controles, e não há
possibilidades de elisão das regulações, então pode ser
concebido um mecanismo de
taxação à entrada de capitais que induz à opção de
investir a longo prazo para ambos os
investidores, na ausência de crises de confiança. Se vier
a se realizar uma probabilidade
de default maior que a esperada pelo agente, o
investimento será revertido, a não ser que
seja oferecido um maior diferencial de taxa de juros.
Controles ex-post de saída de
capitais também poderiam evitar a reversão do
investimento, entretanto, nós não
consideramos esta possibilidade devido à grande perda de
reputação que ela acarreta. Se
o diferencial de taxa de juros for exógeno, como é
tipicamente o caso relevante no
Brasil, podemos ter um incentivo ao investidor disfarçar
seu capital como se fosse de
longo prazo mesmo quando já espera sacar no curto prazo.
Prosseguimos a análise
focando o impacto da capacidade de elisão dos controles
pelo mercado. Incorporamos
no modelo a elisão às restrições de entrada, mostrando que
isto elimina a eficácia dos
controles de capitais. Em verdade, as taxas do controle de
capitais são determinadas
pelo mercado, e então, quanto mais desenvolvido e
sofisticado o mercado financeiro do
país for, mais ativos substitutos e operações de
engenharia financeira podem ser usados
para circundar os controles. Fundamentamos nossas
conclusões relatando diversas
operações de elisão de controles de capitais dos anos
noventa, que deixam claro a
dificuldade de implementar de facto os controles de
capitais. Terminamos a dissertação
com uma análise econométrica sobre a duração da eficácia
dos controels, via a
estimação funções de reposta a impulso. Os resultados
indicam que os controles de
capitais têm apenas entre dois a seis meses de eficácia em
restringir os influxos de
capitais financeiros, corroborando a análise dos casos
relatados de elisão dos controles. / [en] This thesis analyses the effectiveness of capital inflows
controls in changing the
size and composition of international financial flows. The
major contribution is the
focus on capital controls circumvention by the financial
market and its limiting impacts
on the effectiveness of short-run capital flows
restrictions. At first, it is presented a
theoretical approach to the question, discussing how it
should be implemented. The
model has a simple framework and considers two types of
financial investors: patient
and impatient. The first is more interested in long run
returns, and the last gives more
value for short run gains. We show that if the interest
rate differential is endogenous to
the controls fixation, and there is no possibility of
regulations´ circumvention, then
could be arranged a capital entrance tax scheme that
induces the long run investment
option for both investors, in absence of a confidence
crisis. In occurrence of a higher
probability of default than expected by the agent, the
investment will be reverted unless
higher interest rate differential is provided. Ex-post
outflows capital controls could also
avoid the investment reversion, nevertheless, we do not
consider it here. If the interest
rate differential is exogenous, which is typically the
relevant case in Brazil, we might
see an incentive to the investor to rename its capital as
long run even when she expects
to reverse the investment in the short run. We continue
the analysis focusing the impact
of the capacity of capital controls elision by the market.
We incorporate in the model the
circumvention of the entrance restrictions, showing that
it ruins the capital controls
effectiveness. In fact, the taxes of the capital controls
are really determined by the
market, and therefore, as more developed and sophisticated
the financial market of the
country is, more substitute assets and engineer financial
operations can be used to
circumvent the control. We underpin our conclusions
describing several capital controls
elisions operations in Brazil during the nineties, which
make clear the difficulties of
capital controls de facto implementation. We finish the
dissertation with an impulse
response function analyses, that indicates that the
capital controls have only between
two to six months of effectiveness in restricting
financial capital inflows.
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Essays on international finance and trade policyBaumann, Brittany A. 04 March 2016 (has links)
This dissertation covers both policy-oriented and theory-based topics in International Economics. The first two chapters cover financial policy related to the capital account, while the third chapter covers tariff policy related to the current account.
The first chapter examines the theoretical value of capital controls in reducing the probability of bank runs. I develop a global game model with information-based bank runs and strategic complementarities within and between foreign and domestic creditors. My analysis appears to be the first to model the interconnectedness of foreign and domestic creditor behavior. The framework pins down the probability of a bank run and shows that a capital control can lower the probability of a domestic bank run and of capital flight. I also find that a control on outflows is relatively more effective than a control on inflows. Finally, I test the model's implications using the abnormal returns of Brazilian and South Korean bank stock prices as a proxy for the probability of bank runs.
The second chapter analyzes the policy actions of Brazil and Chile between 2009 and the third quarter of 2011, when Brazil deployed capital account regulations and Chile intervened in its currency markets. I examine the effectiveness of each of these actions and the extent to which the actions of Brazil caused capital flow spillovers in the Chilean market. Consistent with the peer-reviewed literature on the subject, I find that capital account regulations had small but significant effects on the shifting the composition of capital inflows toward longer-term investment, on the level and volatility of the exchange rate, on asset prices, and on the ability of Brazil to have independence in monetary policy. Brazil's regulations did also temporarily cause an increase in capital flows into Chile. Chile's interventions did not have a lasting impact on the Chilean exchange rate or on asset prices beyond the initial announcements of the policies. In Brazil's case we thus conclude that Brazil's regulations helped the nation 'lean against the wind,' but were not enough to tame the 'tsunami' of post-crisis capital flows.
The third chapter uses a computable general equilibrium (CGE) model calibrated to late nineteenth century parameters to show that protectionism alleviated the skilled wage gap. Had the U.S. chosen free trade instead of protective tariffs, wage inequality generally would have been higher in the post-bellum era. The imposition of high tariffs after the Civil War may have dampened what some economic historians believe to have been a long-term upward trend in inequality--the rising portion of the American-Kuznets' curve.
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Applying the Draft Articles on the Responsibility of International Organizations: Making International Organizations AccountableLeung, Valerie January 2016 (has links)
The primary aim of this research is to investigate whether the Draft Articles on the Responsibility of International Organizations (ARIO) which were completed in 2011 are an effective means of making IOs accountable for international wrongdoing.
In order to determine this a hypothetical case was created based on the imaginary scenario that the IMF required its member states to eliminate capital controls as a condition for obtaining loans from the organization.
This hypothetical case is argued on behalf of the borrowing states and thus the thesis in part has the form of a legal pleading. This approach was deliberately taken in order to provide a practical example of how the ARIO could be applied to any case related to the responsibility of IOs, not just the one under consideration here. The case is first used to illustrate how the ARIO might be applied in order to determine whether an IO’s conduct amounts to international wrongdoing and results in international responsibility. Secondly, the case is employed to demonstrate whether the ARIO provide remedies for parties injured as a result of international wrongdoing committed by IOs thereby bringing the latter to accountability.
At the end of the investigation it is apparent that conduct such as the IMF’s fictional conduct in relation to its policy would amount to international wrongdoing by an IO in light of the ARIO and would incur international responsibility. However, in the course of applying the ARIO to this fictional case, it becomes evident that although the ARIO are effective for establishing the international responsibility of IOs, they are ineffective as a means of making them accountable for any responsibility they incur because they provide various escapes from the legal consequences for international responsibility. It is therefore concluded that IOs are free to continue to engage in international wrongdoing with impunity despite the creation of the ARIO.
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Measuring the Effectiveness of China’s Capital Flow Management and Progress on Capital Account LiberalizationYow, Xinying 01 January 2016 (has links)
China’s goal of eventually having the renminbi (RMB) be “fully convertible” necessarily requires that its capital account be fully liberated; this paper investigates the on-going changes of the implemented capital controls by China and China’s progress on liberalizing the country’s capital account. The first portion of the paper studies deviations of the covered interest parity, a common measure of capital controls. Econometrical analysis provides evidence for significant and persistent RMB/USD interest rate differentials, calculated from monthly data of 1-month yields for the sample period of 1999 to 2014. At the same time, evidence for cointegration between the onshore and offshore yield suggests that capital flows are not fully restrictive in the long run. The second portion of the paper analyzes constructed de jure capital control indices based on IMF’s AREAER documents following Chen and Qian (2015), and actual capital account flows based on China’s Balance of Payments. The constructed de jure indices quantify the intensity of changes of capital controls, capturing the gradualist style that China adopts in implementing its policies. The index reveals that China has been increasing its pace of capital account liberalization in the recent years compared to the past, and in particular, prioritizes liberalizing controls on outward FDI flows and equity securities inflows. The constructed de jure indices and the respective flows for FDI and equity securities are found to be highly correlated, implying that flows have been responsive to changes in the controls. It also indicates that prior to the restriction lift offs, the capital controls had been relatively effective.
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Three Essays in International MacroeconomicsNanovsky, Simeon Boyanov 01 January 2015 (has links)
This dissertation spans topics related to global trade, oil prices, optimum currency areas, the eurozone, monetary independence, capital controls and the international monetary policy trilemma. It consists of four chapters and three essays. Chapter one provides a brief summary of all three essays. Chapter two investigates the impact of oil prices on global trade. It is concluded that when oil prices increase, countries start trading relatively more with their neighbors. As an application this chapter provides a new estimate of the eurozone effect on trade. Chapter three continues to study the eurozone and asks whether it is an optimum currency area using the member countries’ desired monetary policies. It is concluded that Greece, Spain, and Ireland have desired policies that are the least compatible with the common euro policy and are therefore the least likely to have formed an optimum currency area with the euro. Chapter four provides a new methodology in testing the international trilemma hypothesis. It is concluded that the trilemma holds in the context of the Asian countries.
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Capital controls and external debt term structureAl Zein, Eza Ghassan 01 November 2005 (has links)
In my dissertation, I explore the relationship between capital controls and the choice
of the maturity structure of external debt in a general equilibrium setup, incorporating
explicitly the role of international lenders. I look at specific types of capital controls
which take the form of date-specific and maturity-specific reserve requirements on
external borrowing. I consider two questions: How is the maturity structure of external
debt determined in a world general equilibrium? What are the effects of date- and
maturity-specific reserve requirements on the maturity structure of external debt? Can
they prevent a bank run?
I develop a simple Diamond-Dybvig-type model with three dates. In the low income
countries, banks arise endogenously. There are two short-term bonds and one long-term
bond offered by the domestic banks to international lenders. First I look at a simple
model were international lending is modeled exogenously. I consider explicitly the
maturity composition of capital inflows to a domestic economy. I show that the holdings
of both short-term bonds are not differentiated according to date.
Second, I consider international lending behavior explicitly. The world consists of
two large open economies: one with high income and one with low income. The high income countries lend to low income countries. There exist multiple equilibria and some
are characterized by relative price indeterminacy.
Third, I discuss date-specific and maturity- specific reserve requirements. In my
setup reserve requirements play the role of a tax and the role of providing liquidity for
each bond at different dates. I show that they reduce the scope of indeterminacy. In some
equilibria, I identify a case in which the reserve requirement rate on the long-term debt
must be higher than that on the short-term debt for a tilt towards a longer maturity
structure.
Fourth, I introduce the possibility of an unexpected bank run. I show that some
specific combination of date-and maturity-specific reserve requirements reduce the
vulnerability to bank runs. With regard to the post-bank-run role of international lenders,
I show that international lenders may still want to provide new short-term lending to the
bank after the occurrence of a bank run.
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Controles de Capitais no Brasil: uma avaliação a partir da literatura. / Capital Controls in Brazil: a review from the literature.Mariana Aparecida Rachid Novaes 28 September 2012 (has links)
O objetivo desse trabalho é responder quatro perguntas centrais a partir da literatura sobre os controles de capitais no Brasil: Os controles de capitais foram e têm sido eficazes no Brasil? O Brasil tem seguido o seqüenciamento proposto pelo FMI ao adotar controles de capitais? Os controles de capitais no Brasil são endógenos? A liberalização econômica favorece o crescimento econômico de um país? Para tanto, foram estudados outros casos de adoção de controles de capitais em diferentes economias, a partir da literatura existente, e a experiência brasileira com controles de capitais. A literatura empírica foi analisada com o intuito de verificar se os controles de capitais são eficazes para objetivos de política econômica ou se deve sustentar o processo de liberalização financeira, como defendido por alguns economistas mais ortodoxos. / The main goal of this work is to answer four key questions related to the capital controls in Brazil from a literature perspective: Were capital controls effective, and have they been, in Brazil? Has Brazil followed the sequencing proposed by IMF when adopting capital controls? Are capital controls in Brazil endogenous? Does economic liberalization promote economic growth to a country? For that, experiences of capital controls adoption in different economies were studied, using the international literature, as well as the Brazilian experience with capital controls. The empirical literature has been analyzed in order to verify if capital controls are effective for the main goals of economic politics or if a financial liberalization should be applied, as supported by some orthodox economists.
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Controles de Capitais no Brasil: uma avaliação a partir da literatura. / Capital Controls in Brazil: a review from the literature.Mariana Aparecida Rachid Novaes 28 September 2012 (has links)
O objetivo desse trabalho é responder quatro perguntas centrais a partir da literatura sobre os controles de capitais no Brasil: Os controles de capitais foram e têm sido eficazes no Brasil? O Brasil tem seguido o seqüenciamento proposto pelo FMI ao adotar controles de capitais? Os controles de capitais no Brasil são endógenos? A liberalização econômica favorece o crescimento econômico de um país? Para tanto, foram estudados outros casos de adoção de controles de capitais em diferentes economias, a partir da literatura existente, e a experiência brasileira com controles de capitais. A literatura empírica foi analisada com o intuito de verificar se os controles de capitais são eficazes para objetivos de política econômica ou se deve sustentar o processo de liberalização financeira, como defendido por alguns economistas mais ortodoxos. / The main goal of this work is to answer four key questions related to the capital controls in Brazil from a literature perspective: Were capital controls effective, and have they been, in Brazil? Has Brazil followed the sequencing proposed by IMF when adopting capital controls? Are capital controls in Brazil endogenous? Does economic liberalization promote economic growth to a country? For that, experiences of capital controls adoption in different economies were studied, using the international literature, as well as the Brazilian experience with capital controls. The empirical literature has been analyzed in order to verify if capital controls are effective for the main goals of economic politics or if a financial liberalization should be applied, as supported by some orthodox economists.
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Do capital controls boost resilence to crises?Goossens, Roman 26 July 2013 (has links)
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Previous issue date: 2013-07-26 / Capital controls are back in vogue and a number of emerging markets reintroduced these measures in recent years in the face of a 'flood' of international capital. Policymakers argue that these tools buttress their economies from the risk of a 'sudden stop' in capital flows. We show that capital controls seem to make emerging market economies (EMEs) more resistant to financial crises (i.e. that output loss following a crisis is lower when controls are higher). However that they also seem to make EMEs more crisis-prone, increasing the probability of crises. Policymakers should hence carefully evaluate whether the benefits of capital controls outweigh the costs before implementing them. / Os controles de capitais estão novamente em voga em razão dos países emergentes reintroduzirem essas medidas nos últimos anos face a abundante entrada de capital internacional. As autoridades argumentam que tais medidas protegem as economias no caso de uma 'parada abrupta' desses fluxos. Será demonstrado que os controles de capitais parecem fazer com que as economias emergentes (EMEs) fiquem mais resistentes diante de uma crise financeira (por exemplo, uma queda na atividade econômica seguida de uma crise é menor quando o controle é maior). No entanto, os controles de capitais parecem deixar as economias emergentes (EMEs) também mais propícias a uma crise. Deste modo, as autoridades devem ser cautelosas na avaliação quanto aos riscos e benefícios relativos a aplicação das medidas dos controles de capitais.
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