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

In: Economics in a Changing World

Author

Listed:
  • Guillermo A. Calvo

    (International Monetary Fund)

  • Leonardo Leiderman

    (University of Tel Aviv)

  • Carmen M. Reinhart

    (International Monetary Fund)

Abstract

For the first time since the onset of the debt crisis in the summer of 1982, capital began to return to Latin America during 1990 and 1991; a phenomenon analyzed by Calvo, Leiderman, and Reinhart (1993). In general, Latin America’s re-entry into the international capital markets, as noted by El-Erian (1992), was perceived as a positive development. However, policy-makers in the region have also voiced some concern about the less favourable side-effects of these capital inflows. First, it was feared that the real exchange rate appreciation that often accompanies these inflows would adversely affect the international competitiveness of the export sector. Second, there was concern that the inflows could be reversed abruptly, possibly doing considerable damage to the domestic financial system in the process. The fear of reversal was based on the experience of the debt crisis, which followed on the heels of the ‘capital bonanza’ of 1978–81.

Suggested Citation

  • Guillermo A. Calvo & Leonardo Leiderman & Carmen M. Reinhart, 1994. "Capital Inflows to Latin America: The 1970s and 1990s," International Economic Association Series, in: Edmar L. Bacha (ed.), Economics in a Changing World, chapter 6, pages 123-148, Palgrave Macmillan.
  • Handle: RePEc:pal:intecp:978-1-349-23458-5_6
    DOI: 10.1007/978-1-349-23458-5_6
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    References listed on IDEAS

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    1. 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) (Régimen cambia," IMF Staff Papers, Palgrave Macmillan, vol. 30(1), pages 75-112, March.
    2. Mr. Donald J Mathieson & Ms. Liliana Rojas-Suárez, 1992. "Liberalization of the Capital Account: Experiences and Issues," IMF Working Papers 1992/046, International Monetary Fund.
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    More about this item

    Keywords

    Gross Domestic Product; Real Exchange Rate; Real Interest Rate; Capital Inflow; Debt Crisis;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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