Bubble thy neighbour: Portfolio effects and externalities from capital controls
We use changes in Brazil's tax on capital inflows from 2006 to 2013 to test for direct portfolio effects and externalities from capital controls on investor portfolios. We find that an increase in Brazil's tax on foreign investment in bonds causes fund managers to significantly decrease th...
| Principais autores: | , , , |
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| Outros Autores: | |
| Formato: | Artigo |
| Publicado em: |
Elsevier BV
2019
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| Acesso em linha: | http://hdl.handle.net/1721.1/120805 https://orcid.org/0000-0002-9340-6063 |
| _version_ | 1826197158817169408 |
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| author | Fratzscher, Marcel Kostka, Thomas Straub, Roland Forbes, Kristin J |
| author2 | Sloan School of Management |
| author_facet | Sloan School of Management Fratzscher, Marcel Kostka, Thomas Straub, Roland Forbes, Kristin J |
| author_sort | Fratzscher, Marcel |
| collection | MIT |
| description | We use changes in Brazil's tax on capital inflows from 2006 to 2013 to test for direct portfolio effects and externalities from capital controls on investor portfolios. We find that an increase in Brazil's tax on foreign investment in bonds causes fund managers to significantly decrease their portfolio allocations to Brazil in both bonds and equities. Fund managers simultaneously increase allocations to other countries that have substantial exposure to China and decrease allocations to countries viewed as more likely to adjust their capital controls. Much of the effect of capital controls on portfolio allocation appears to occur through signalling — i.e., changes in investor expectations about future policies — rather than the direct cost of the controls. This evidence of significant externalities from capital controls suggests that any assessment of controls should consider their effects on portfolio flows to other countries. Keywords: Capital controls; Externalities; Spillovers; Signalling; Mutual funds; Brazil |
| first_indexed | 2024-09-23T10:43:24Z |
| format | Article |
| id | mit-1721.1/120805 |
| institution | Massachusetts Institute of Technology |
| last_indexed | 2024-09-23T10:43:24Z |
| publishDate | 2019 |
| publisher | Elsevier BV |
| record_format | dspace |
| spelling | mit-1721.1/1208052022-09-30T22:33:22Z Bubble thy neighbour: Portfolio effects and externalities from capital controls Fratzscher, Marcel Kostka, Thomas Straub, Roland Forbes, Kristin J Sloan School of Management Forbes, Kristin J We use changes in Brazil's tax on capital inflows from 2006 to 2013 to test for direct portfolio effects and externalities from capital controls on investor portfolios. We find that an increase in Brazil's tax on foreign investment in bonds causes fund managers to significantly decrease their portfolio allocations to Brazil in both bonds and equities. Fund managers simultaneously increase allocations to other countries that have substantial exposure to China and decrease allocations to countries viewed as more likely to adjust their capital controls. Much of the effect of capital controls on portfolio allocation appears to occur through signalling — i.e., changes in investor expectations about future policies — rather than the direct cost of the controls. This evidence of significant externalities from capital controls suggests that any assessment of controls should consider their effects on portfolio flows to other countries. Keywords: Capital controls; Externalities; Spillovers; Signalling; Mutual funds; Brazil 2019-03-07T16:57:02Z 2019-03-07T16:57:02Z 2016-01 2015-12 2019-02-13T15:30:07Z Article http://purl.org/eprint/type/JournalArticle 00221996 http://hdl.handle.net/1721.1/120805 Forbes, Kristin et al. “Bubble Thy Neighbour: Portfolio Effects and Externalities from Capital Controls.” Journal of International Economics 99 (March 2016): 85–104 © 2016 Elsevier B.V. https://orcid.org/0000-0002-9340-6063 http://dx.doi.org/10.1016/J.JINTECO.2015.12.010 Journal of International Economics Creative Commons Attribution-NonCommercial-NoDerivs License http://creativecommons.org/licenses/by-nc-nd/4.0/ application/pdf Elsevier BV NBER |
| spellingShingle | Fratzscher, Marcel Kostka, Thomas Straub, Roland Forbes, Kristin J Bubble thy neighbour: Portfolio effects and externalities from capital controls |
| title | Bubble thy neighbour: Portfolio effects and externalities from capital controls |
| title_full | Bubble thy neighbour: Portfolio effects and externalities from capital controls |
| title_fullStr | Bubble thy neighbour: Portfolio effects and externalities from capital controls |
| title_full_unstemmed | Bubble thy neighbour: Portfolio effects and externalities from capital controls |
| title_short | Bubble thy neighbour: Portfolio effects and externalities from capital controls |
| title_sort | bubble thy neighbour portfolio effects and externalities from capital controls |
| url | http://hdl.handle.net/1721.1/120805 https://orcid.org/0000-0002-9340-6063 |
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