Bubble thy Neighbor (Forbes et al.)

Bubble thy neighbor: Portfolio effects and externalities from capital controls by Kristin Forbes, Marcel Fratzscher, Thomas Kostka and Roland Straub published by NBER. “We use changes in Brazil´s tax on capital inflows from 2006 to 2011 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 investors to significantly decrease their portfolio allocations to Brazil in both bonds and equities.”