TY  - JOUR
AU  - Carvalho, Bernardo S. de M
AU  - Garcia, Márcio G.P.
TI  - Ineffective Controls on Capital Inflows Under Sophisticated Financial Markets: Brazil in the Nineties
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 12283
PY  - 2006
Y2  - June 2006
DO  - 10.3386/w12283
UR  - http://www.nber.org/papers/w12283
L1  - http://www.nber.org/papers/w12283.pdf
N1  - Author contact info:
Bernardo S. de M. Carvalho
E-Mail: bscarvalho@gaveainvest.com.br

Marcio Garcia
Pontifical Catholic University of Rio De Janiero
Tel: 8572933641
Fax: 011552135271084
E-Mail: marciogomespintogarcia@gmail.com
M1  - published as Bernardo S. de M. Carvalho, Márcio G. P. Garcia. "Ineffective Controls on Capital Inflows under Sophisticated Financial Markets: Brazil in the Nineties," in Sebastian Edwards and Márcio G. P. Garcia, editors, "Financial Markets Volatility and Performance in Emerging Markets" University of Chicago Press (2008)

AB  - We analyze the Brazilian experience in the 1990s to assess 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.
ER  -