科学研究

This paper evaluates the effect of capital controls on the transmission of international monetary policy shocks (IMP) to an emerging market.  Using detailed regulatory data from Colombia, we test whether a mild form of capital controls that restricts short-term cross-border flows is able to shield the Colombian economy from monetary policy shocks from the Euro area and the United States.  We find that, for the period in which Colombian authorities-imposed capital controls, local monetary policy was more effective in controlling loan rates and loan growth, especially for domestic banks and less for foreign-funding dependent banks. After capital controls were lifted, the effect of local monetary policy on bank lending weakened while the effect of foreign monetary policy strengthened.  In addition, we find that the effects of IMP shocks on loan conditions are greater for loans granted by foreign banks compared to loans from domestic banks, and over banks that depend more on cross-border lending.  Thus, our results suggest that capital controls are effective at re-establishing monetary policy independence and contribute to mitigate the impact of the global financial cycle.