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Capital Inflows to Latin America: The 1970s and 1990s

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  • Reinhart, Carmen
  • Calvo, Guillermo
  • Leiderman, Leonardo

Abstract

For the first time since the onset of the debt crisis in the slimmer or 1982, capital began to return to Latin America during 1990 and 1991.In general, Latin America's re-entry into the international capital markets was perceived as a positive development. However, policy-makers in the region have also voiced concern about the less favourable side-effects of these capital inflows. First, it was feared that the real exchange rate appreciation that of tell accompanies these inflows would adversely affect the international competitiveness of the export sector. Second, there was concern thatthe inflows could be reversed abruptly, possibly doing considerable damage to the domestic financial system in the process. The fear (If reversal was based on the experience of the debt crisis, which followed on the heels of the 'capital bonanza' of 1978-81. This chapter compares the recent capital inflows experience with that of the late 1970s. The analysis examines the differences and similarities between the two episodes over three broad areas:1. Domestic macroeconomic conditions in the recipient countries at the outset of both episodes. 2. The behaviour of the external factors that influence the international allocation of capital.3. The response of key macroeconomic variables, such as the real exchange rate, reserves, and stock prices to the inflow of capital.

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Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 8196.

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Date of creation: 1994
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Handle: RePEc:pra:mprapa:8196

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  1. Donald J. Mathieson & Liliana Rojas-Suárez, 1992. "Liberalization of the Capital Account," IMF Working Papers, International Monetary Fund 92/46, International Monetary Fund.
  2. Alexander K. Swoboda & Jacob A. Frenkel & Jacques R. Artus, 1983. "Exchange Rate Regimes and European-U.S. Policy Interdependence [with Comments] (Régimes de taux de change et interdépendance des politiques économiques en Europe et aux Etats-Unis) (Régime," IMF Staff Papers, Palgrave Macmillan, vol. 30(1), pages 75-112, March.
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Cited by:
  1. Fernandez-Arias, Eduardo & Montiel, Peter J., 1995. "The surge in capital inflows to developing countries : prospects and policy response," Policy Research Working Paper Series, The World Bank 1473, The World Bank.
  2. Jeffrey A. Frankel & Chudozie Okongwu, 1995. "Liberalized portfolio capital inflows in emerging markets: sterilization, expectations and the incompleteness of interest rate convergence," Pacific Basin Working Paper Series, Federal Reserve Bank of San Francisco 95-04, Federal Reserve Bank of San Francisco.
  3. Jeffrey A. Frankel, 2010. "Monetary Policy in Emerging Markets: A Survey," NBER Working Papers 16125, National Bureau of Economic Research, Inc.
  4. Leonardo Leiderman & Guillermo A. Calvo & Carmen Reinhart, 1994. "Inflows of Capital to Developing Countries in the 1990s: Causes and Effects," Research Department Publications, Inter-American Development Bank, Research Department 4002, Inter-American Development Bank, Research Department.
  5. Julian Caballero, 2012. "Do Surges in International Capital Inflows Influence the Likelihood of Banking Crises? Cross-Country Evidence on Bonanzas in Capital Inflows and Bonanza-Boom- Bust Cycles," Research Department Publications, Inter-American Development Bank, Research Department 4775, Inter-American Development Bank, Research Department.
  6. Marc Hofstetter, 2007. "Disinflating From Moderate Inflation," DOCUMENTOS CEDE, UNIVERSIDAD DE LOS ANDES-CEDE 002373, UNIVERSIDAD DE LOS ANDES-CEDE.
  7. Leonardo Leiderman & Guillermo A. Calvo & Carmen Reinhart, 1994. "Entradas de capitales a países en desarrollo en los años 90: causas y efectos," Research Department Publications, Inter-American Development Bank, Research Department 4003, Inter-American Development Bank, Research Department.
  8. repec:nbr:nberwo:13194 is not listed on IDEAS

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