Sterilization of Capital Inflows and Balance of Payments Crises

Marcos Buscaglia

No 189, Econometric Society 2004 Latin American Meetings from Econometric Society

Abstract: Large capital inflows and repeated balance of payments crises (BOPC) associated with their sudden reversal have characterized the emerging market economies during the 90's. Sterilized intervention has been the most common response to capital inflows. This paper links the sterilization efforts with BOPC in a general equilibrium model. We study an economy facing a temporary decrease in the international interest rate, and show that an attempt to sterilize capital inflows leads the economy to a BOPC, while a pure Currency Board would avoid it. We argue that this experiment is relevant to understand the 1994 Mexican currency crisis.

Keywords: Balance of Payments Crises; Sterilization of Capital Inflows; Mexican Crisis (search for similar items in EconPapers)
JEL-codes: F31 F32 (search for similar items in EconPapers)
Date: 2004-08-11
New Economics Papers: this item is included in nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://repec.org/esLATM04/up.15721.1081993132.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecm:latm04:189

Access Statistics for this paper

More papers in Econometric Society 2004 Latin American Meetings from Econometric Society Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F. Baum ().