Capital inflows to Latin America

Abstract

Capital inflows are not an unmitigated blessing for the receiving region or country; in fact, they may pose serious dilemmas for economic policy. Large capital inflows are often associated with money and credit expansion, inflationary pressures, a real exchange rate appreciation, and a deterioration in the current account of the balance of payments. In addition, the history of Latin America provides ample evidence that massive capital inflows may also have strong impacts on the stock market, the real estate market, and the money market-impacts which may well threaten tbe stability of these markets and of the financial system as a whole.capital inflows exchange rate policy reserves capital controls