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| Author: | Ali Abbas, S.M. |
| Title: | Reassessing the costs and benefits of imposing capital controls: the case of Chile (1991-98) |
| Journal: | Latin American business review
2003 : VOL. 4:2, p. 55-98 |
| Index terms: | Cost benefit analysis Exchange rates Chile |
| Freeterms: | Capital controls |
| Language: | eng |
| Abstract: | The aim of this article is to highlight some of the less-mentioned costs and benefits of imposing capital controls (particularly on inflows) in lower income countries (LICs). The impact of controls on the effectiveness of conventional policy tools, as well as the limitations of the later, are studied in the context of Chile's imposition of unremunerated reserve requirements (URRs) in the early 1990s. Then, using better data and a slightly different specification from previous studies, an error-correction model for Chile's real exchange rate (RER) is set up with a view to assessing controls' impact thereon. The key result is that controls did depreciate the real exchange rate in the short run. |
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