El Encaje, los Flujos de Capitales y el Gasto: Una Evaluación empírica

The rapid expansion of private-sector expenditure in the 1990s was accompanied by a massive and increasing foreign capital inflow. A tight economic policy, characterized by high interest rates, was implemented in order to contain the private expenditure growth. As a way of reconciling high interest rates with increasing international financial integration, a reserve requirement on capital inflows was applied. The paper shows that private spending responds to the volume of capital inflows, and that these, in turn, respond significantly to the reserve requirement. We obtain that the effect of monetary policy on domestic spending is weakened by capital inflows when the exchange rate is not free to fluctuate in response to changes in interest rates. The reserve requirement can be used to avoid this weakening, by compensating the effects on capital inflows produced by interest rate spreads. The results also show that if the reserve requirement had been eliminated, capital inflows would have grown significantly and the excess domestic demand situation of 1997 would have been aggravated. A more effective strategy for controlling private expenditure would have needed a higher reserve requirement and an even tighter monetary policy, or else a counter-cyclical fiscal policy that would have increased public saving in periods of private expenditure expansion.