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Managing capital inflows in Chile

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Author Info

  • Manuel Agosin
  • Ricardo French-Davis

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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Bibliographic 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.;

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Citations

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Cited by:
  1. TREMBLAY, Rodrigue, 1999. "Les facteurs declencheurs des crises financieres internationales," Cahiers de recherche 9907, Universite de Montreal, Departement de sciences economiques.
  2. 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.
  3. repec:idb:brikps:21718 is not listed on IDEAS
  4. Montes, M.F., 1996. "Country Responses to Massive Capital Flows," Research Paper 121, World Institute for Development Economics Research.
  5. Peter Kenen, 1996. "Analyzing and managing exchange-rate crises," Open Economies Review, Springer, vol. 7(1), pages 469-492, March.
  6. Jeffrey Sachs & Aaron Tornell & Andres Velasco, 1996. "Financial Crises in Emerging Markets: The Lessons from 1995," Harvard Institute of Economic Research Working Papers 1759, Harvard - Institute of Economic Research.
  7. Ricardo Ffrench-Davis & Manuel R. Agosin, 1999. "Capital flows in Chile: from the tequila to the Asian crises," Journal of International Development, John Wiley & Sons, Ltd., vol. 11(1), pages 121-139.
  8. Franklin Huaita & Manuel Agosín Trumper, 2007. "Why Should Emerging-Market Countries (Still) Concern Themselves With Capital Inflows?," Working Papers wp268, University of Chile, Department of Economics.
  9. Ricardo Ffrench-Davis, 2008. "From Financieristic To Real Macroeconomics: Seeking Development Convergence In Ees," Working Papers wp272, University of Chile, Department of Economics.
  10. Jean-Pierre Allegret, 2000. "Quel role pour les controles des mouvements internationaux de capitaux ?," Economie Internationale, CEPII research center, issue 81, pages 77-108.
  11. Ffrench-Davis, Ricardo & Larrain, Guillermo, 2002. "How Optimal are the Extremes? Latin American Exchange Rate Policies During the Asian Crisis," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  12. K.S. Jomo & Ilene Grabel & Gerald Epstein, 2003. "Capital Management Techniques In Developing Countries: An Assessment of Experiences From the 1990s and Lessons for the Future," Working Papers wp56, Political Economy Research Institute, University of Massachusetts at Amherst.
  13. Vicente Cuñat & Claudio Gonzalez-Iturriaga, 2005. "Shocks to the cost of borrowing and capital structure," LSE Research Online Documents on Economics 43165, London School of Economics and Political Science, LSE Library.
  14. Ffrench-Davis, Ricardo, 2002. "Financial Crises and National Policy Issues: An Overview," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  15. Kletzer, Kenneth M., 2000. "The effectiveness of self-protection policies for safeguarding emerging market economies from crises," ZEI Working Papers B 08-2000, ZEI - Center for European Integration Studies, University of Bonn.
  16. Ocampo, Jose Antonio, 2002. "Capital-Account and Counter-Cyclical Prudential Regulations in Developing Countries," Working Paper Series UNU-WIDER Research Paper , World Institute for Development Economic Research (UNU-WIDER).
  17. José Antonio OCAMPO, 2001. "Recasting The International Financial Agenda," G-24 Discussion Papers 13, United Nations Conference on Trade and Development.
  18. Goyal, Ashima, 2002. "Reform proposals from developing Asia: finding a win-win strategy," MPRA Paper 30527, University Library of Munich, Germany.
  19. Guillermo Le Fort & Sergio Lehmann, 2000. "El Encaje, los Flujos de Capitales y el Gasto: Una Evaluación empírica," Working Papers Central Bank of Chile 64, Central Bank of Chile.
  20. Moritz Cruz & Bernard Walters, 2008. "Is the accumulation of international reserves good for development?," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 665-681, September.

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