Capital controls in Brazil: Effective?

TD n. 606 2013

Marcos Chamon, Márcio Garcia.

We analyze the impact of the controls and restrictions on capital inflows that Brazil has adopted

since late 2009. We document that these measures had some success in segmenting the Brazilian

and global financial markets, as measured by wedges between onshore and offshore prices of

similar fixed and variable income assets. However, that failed to translate into significant

changes in the exchange rate, at least in the immediate aftermath of these measures, suggesting

limited success in mitigating real appreciation. But capital controls/restrictions may have

contributed to the sizable depreciation of the real in 2012, possibly amplifying the effect on the

exchange rate of cuts in the interest policy rate during that period.  (revisto em 8/2014)

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