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

By Francisco d Nadal De Simone, Piritta Sorsa

April 1, 1999

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Francisco d Nadal De Simone, and Piritta Sorsa. A Review of Capital Account Restrictions in Chile in the 1990s, (USA: International Monetary Fund, 1999) accessed December 22, 2024

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper examines the Chilean experience with capital controls and reviews studies on controls on capital inflows. Controls on Chile’s inflows had only a temporary impact in reducing specific inflows because they were affected by avoidance. There is some evidence that controls increased interest rates and altered the composition of capital inflows. The studies, however, contain important methodological problems in measuring flows and significant econometric weaknesses, which cast doubt on the robustness of the estimates. No study has assessed the political economy of the controls. It seems premature to view the Chilean experience as supportive of controls on capital inflows.

Subject: Balance of payments, Capital controls, Capital flows, Capital inflows, Financial services, Foreign exchange, Real exchange rates, Real interest rates

Keywords: Arbitrage condition, Asia and Pacific, Capital control, Capital controls, Capital flow, Capital flows, Capital inflows, Capital outflow, Central bank, Effect of the URR, Effectiveness of the URR, Flows in Chile, Interest rate differential, Interest rates and exchange rates, Long-term debt, Monetary policy, Real exchange rates, Real interest rates, Short-term capital, Short-term capital flow, Transitory capital control, URR effectiveness, URR tax, URR variable, WP

Publication Details

Pages:

55
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 1999/052
Stock No:

WPIEA0521999
ISBN:

9781451847239
ISSN:

1018-5941

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