Controls on Short-Term Capital Inflows - The Latin American Experience and Lessons for DMCs
Rana, Pradumna B | September 1998
This paper has the following objectives. First, it attempts to identify the differences between short-term capital (hot money) and long-term capital. Second, it reviews the expe¬riences of the Latin American countries, namely, Chile and Colombia, which have imposed controls on capital in the form of unremunerated deposits. Large and excessive amounts of short-term capital inflows were an important contributory factor to the East Asian financial crisis. An important lesson from the crisis is that the composition of foreign capital deserves as much attention as its over-all level (Appendix I). Correcting the policy mistakes that led to the surges in short-term private capital flows is, therefore, an obvious way of discouraging such inflows. In addition, this paper determines whether there is a role for direct controls on short-term capital. Third, based on the Latin American experience, the paper derives lessons for the DMCs, both the affected and the unaffected, on how to avoid large surges of short-term capital.
CitationRana, Pradumna B. 1998. Controls on Short-Term Capital Inflows - The Latin American Experience and Lessons for DMCs. © Asian Development Bank. http://hdl.handle.net/11540/2629. License: CC BY 3.0 IGO.
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