Capital Controls in Brazil: Effective? by Marcos Chamon, Márcio Garcia published by IMF (/2014).
In the aftermath of the 2008 crisis, capital poured in emerging markets, enticing many different responses. No emerging market experimented as actively with capital controls as Brazil did during that period. We analyze the impact of the capital controls that Brazil adopted since late 2009. These policies had some success in segmenting the Brazilian from global financial markets, as measured by the spread between onshore and offshore dollar interest rates, as well as ADR premia relative to the underlying local stocks. The measures adopted from late 2009 to mid-2011 did not translate into significant changes in the exchange rate, suggesting limited success in mitigating exchange rate appreciation. However, the exchange rate strongly depreciates after a tax on the notional amount of derivatives is adopted in mid-2011. The last of the three restrictions studied may have depreciated the Brazilian real by as much 10 percent. That strong response may have been driven by complementarities with the previous measures.
