A Review of Capital Account Restrictions in Chile in the 1990's

Simone, Francisco d Nadal De; Sorsa, Piritta

doi:10.5089/9781451847239.001

Cited by 16 publications

(2 citation statements)

References 15 publications

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“…Around 1996, a substantial empirical literature began to emerge on the effectiveness of the Chilean URR. Although a review of the literature by Nadal‐De Simone and Sorsa () cautioned against prematurely accepting the Chilean experience as supportive of the effectiveness of such controls, most had interpreted the body of empirical evidence to believe that the URR had lengthened the maturity of capital inflows (if not reduced the total volume). Some studies are more supportive of the volume effect as well (Gallego et al ; Le Fort and Lehmann ), whereas others have found limited impact on the real exchange rate or the interest rate differential, especially in the short run (De Gregorio et al ; Herrera and Valdes ).…”

Section: Introductionmentioning

confidence: 99%

Testing the Effectiveness of Market‐Based Controls: Evidence From the Experience of Japan With Short‐Term Capital Flows in the 1970s

Esaka

Takagi

2013

International Finance

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This paper tests the effectiveness of marginal reserve requirements employed by Japan in the 1970s to influence short‐term capital flows. We thereby contribute to the ongoing debate on the use of capital controls—market‐based ones in particular. While the case for using market‐based controls relies on the mixed evidence from the experience of Chile with unremunerated reserve requirements, testing for their effectiveness is hampered by the endogeneity of such a measure, which is typically imposed or intensified when inflows surge. We address this problem in the Japanese context by applying the method of propensity score matching, and find that an increase in marginal reserve requirements modestly reduced short‐term capital inflows through non‐resident free‐yen accounts. The impact was not statistically significant, however, implying that the price elasticity of short‐term capital flows was likely small. We conclude that market‐based controls must be nearly prohibitive, perhaps combined with administrative measures, to be effective in a meaningful way.

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Section: Introductionmentioning

confidence: 99%

Testing the Effectiveness of Market‐Based Controls: Evidence From the Experience of Japan With Short‐Term Capital Flows in the 1970s

Esaka

Takagi

2013

International Finance

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“…Simone and Sorsa (1999) is an excellent survey of the empirical literature on the Chilean capital controls.…”

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confidence: 99%

Council of Economic Advisers

Hammes¹

2008

Encyclopedia of Business Ethics and Society

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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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Microeconomic effects of capital controls: The chilean experience during the 1990s

Gallego

Hernández

2003

Int. J Fin Econ

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This paper provides empirical evidence on some of the microeconomic effects of the capital controls introduced in Chile during the 1990s, in particular, the unremunerated reserve requirement (URR). By looking at financial statements for a group of 73 Chilean firms during 1986-2001, the paper attempts to identify the effects of the URR on the firms' costs and ways of financing. Results show that the effects of the URR are firm specific; for instance, there are striking differences in the response to the URR among firms of different size and those with or without access to international capital markets. Copyright © 2003 John Wiley & Sons, Ltd.

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A Review of Capital Account Restrictions in Chile in the 1990's

Cited by 16 publications

References 15 publications

Testing the Effectiveness of Market‐Based Controls: Evidence From the Experience of Japan With Short‐Term Capital Flows in the 1970s

Testing the Effectiveness of Market‐Based Controls: Evidence From the Experience of Japan With Short‐Term Capital Flows in the 1970s

Council of Economic Advisers

Microeconomic effects of capital controls: The chilean experience during the 1990s

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