ARE CAPITAL CONTROLS AND CENTRAL BANK INTERVENTION EFFECTIVE?

Intervention in the foreign exchange market and capital controls are two controversial policy options that many countries have adopted in order to influence the exchange rate and moderate capital flows. The objective of this paper is to examine their effectiveness for a representative Emerging Market economy. The main findings indicate that neither central bank intervention nor capital controls used separately were successful for depreciating the exchange rate but have the side effect of augmenting its volatility. Nonetheless, during a period when both policies were used simultaneously, they were effective to impact the exchange rate, without increasing its volatility. ?SON EFECTIVOS LOS CONTROLES DE CAPITAL Y LA INTERVENCION DEL BANCO CENTRAL? RESUMEN La intervencion en el mercado cambiario y los controles de capital son dos instrumentos de politica controversiales que muchos paises han utilizado para influir sobre la tasa de cambio y moderar los flujos de capital. El objetivo de este articulo es evaluar su efectividad para una economia emergente representativa. Los principales hallazgos indican que ni la intervencion cambiaria ni los controles de capital utilizados por separado tuvieron exito en afectar la tasa de cambio, pero si tuvieron un impacto no deseado como fue aumentar su volatilidad. Sin embargo, durante el periodo en el que ambas politicas se usaron simultaneamente, fueron efectivas en impactar la tasa de cambio sin incrementar su volatilidad.