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Managing capital inflows in Chile

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Author Info
Manuel Agosin
Ricardo French-Davis

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Abstract

This paper characterizes the surge of foreign capital inflows into Chile in the 1990s, it describes the policies to deal with these inflows, and analyzes the results of the policy mix used in terms of effectiveness with which flows were managed and effects on growth and investment. About 60 per cent of the flows have been foreign direct investment (FDI), the remainder being a mix of portfolio inflows, short-term credit, and longer-term borrowing, basically by banks and large domestic firms. The policies adopted have included the imposition of an unremunerated reserve requirement on all financial inflows (excluding FDI), active sterilized intervention on foreign exchange markets to prevent undue appreciation of the peso, and the use of a sliding exchange rate band. These policies appear to have prevented an even larger surge of foreign capital, have kept real exchange rate appreciation within bounds, and are partly responsible for the country’s positive growth performance. However; they have

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File URL: http://econ.uchile.cl/public/Archivos/pub/c5cc72ba-5cef-4edf-accd-19c76a8edfc1.pdf
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Publisher Info
Article provided by University of Chile, Department of Economics in its journal Estudios de Economia.

Volume (Year): 24 (1997)
Issue (Month): 2 Year 1997 (December)
Pages: 297-326
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Handle: RePEc:udc:esteco:v:24:y:1997:i:2:p:297-326

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Web page: http://www.econ.uchile.cl/
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Related research
Keywords: Foreign capital inflows; investment.;

Cited by:
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  1. Leonardo Villar & Ricardo Ffrench-Davis, 2004. "Real Macroeconomic Stability And The Capital Account In Chile And Colombia," BORRADORES DE ECONOMIA 003416, BANCO DE LA REPÚBLICA. [Downloadable!]
  2. Peter Kenen, 1996. "Analyzing and managing exchange-rate crises," Open Economies Review, Springer, vol. 7(1), pages 469-492, March. [Downloadable!] (restricted)
  3. John Eatwell & Lance Taylor, 1998. "The Performance of Liberalized Capital Markets," SCEPA Working Papers 1998-13, Schwartz Center for Economic Policy Analysis (SCEPA), The New School, revised Sep 1998. [Downloadable!]
  4. José Antonio OCAMPO, 2001. "Recasting The International Financial Agenda," G-24 Discussion Papers 13, United Nations Conference on Trade and Development. [Downloadable!]
  5. Ricardo Ffrench-Davis & Leonardo Villar, . "Real Macroeconomic Stability and the Capital Account in Chile and Colombia," Borradores de Economia 294, Banco de la Republica de Colombia. [Downloadable!]
  6. Ilene Grabel, 2005. "Taxation of International Private Capital Flows and Securities Transactions in Developing Countries: Do Public Finance Considerations Augment the Macroeconomic Dividends?," International Review of Applied Economics, Taylor and Francis Journals, vol. 19(4), pages 477-497, October. [Downloadable!] (restricted)
  7. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," NBER Working Papers 5576, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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