Revisiting Price-based Controls on Capital Inflows in a “Sophisticated” Emerging Market

SummaryLarge and volatile capital flows pose serious challenges for macroeconomic management in developing countries. In this paper, we examine the price-based capital controls adopted by Brazil during the 1990s with the objective of facing some of those difficulties. We use data on capital account transactions at a monthly frequency in order to evaluate the effects of those policies on net fixed-income capital flows and on total portfolio flows using GMM techniques. Our results suggest that the controls could have been effective in reducing both types of flows.