Effectiveness of capital account regulation: Lessons from Brazil and Peru

This paper econometrically analyses the effectiveness of capital account regulation in Brazil and Peru between 2008 and 2013. The analysis, based on new indices that carefully compute regulatory changes in both countries, suggests that Brazil was successful only in shifting the composition of inflows toward longer-term, but not in curbing its aggregate volume. Peru managed to cut short-term inflows addressed to assets issued by the Central Bank, but the short-term inflows received by commercial banks remained unaffected. Regulators' decisions about the measures selected and the resolute on their implementation, under a cost-benefit analysis, seem to be determinant for effectiveness.