Capital Inflows and Real Exchange Rate Appreciation in Latin America: The Role of External Factors
August 1, 1992
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Summary
The characteristics of recent capital inflows into Latin America are discussed. It is argued that these inflows are partly explained by conditions outside the region, like recession in the United States and lower international interest rates. This suggests the possibility that a reversal of those conditions may lead to a future capital outflow, increasing the macroeconomic vulnerability of Latin American economies. Policy options are argued to be limited.
Subject: Balance of payments, Capital account, Capital inflows, Capital outflows, Central banks, Foreign exchange, International reserves, Real exchange rates
Keywords: appreciation in Latin America, balance of payments, Capital account, capital gain, Capital inflows, Capital outflows, central bank, episode of reserves accumulation, external shock, forecast error variance, interest rate differential, International reserves, nominal exchange rate, Real exchange rates, reserves index, secondary market, terms of trade, Western Hemisphere, WP
Pages:
66
Volume:
1992
DOI:
Issue:
062
Series:
Working Paper No. 1992/062
Stock No:
WPIEA0621992
ISBN:
9781451964455
ISSN:
1018-5941
Notes
Also published in Staff Papers, Vol. 40, No. 1, March 1993.
