- Email: [email protected]
Central banking after the Latin American debt crisis
Arminio Fraga
Stabilization and structural reform that has characterized Latin America as of late is based upon an increasing adherence to sound fiscal and monetary policies. The economic deprivation brought ozzby the debt crisis has served as a powerful impetus behind these developments. The macroeconomic policies leading up to the crisis have been put aside in favor of a legal framework of transparent budgetary practices and an independent central bank. Fraga’s article analyzes the recent evolution of the central banks in Argentina, Brazil, Chile, Colombia, Mexico and Venezuela.
Artninio Fraga is a Managing Director at Sores Fund Management. His primary responsibility is portfolio management and strategies for emerging markets. He is also an Adjunct Professor at the School of International and Public Affairs at Columbia University. Prior to joining Sores Fund Management in early 1993, Fraga served as a Board member and Director of International Affairs for the Central Bank of Brazil. He has worked for Salomon Brothers and for Bunco de Investimentos Garantia in Rio de Janeiro. Fraga holds a Ph.D. in economics from Princeton University.
After the lost decade of the 198Os, Latin America is getting back on track. Stabilization and structural reform are the guiding themes behind economic policies from the Rio Grande down to the Strait of Magellan. Results so far are extremely encouraging, with a few countries approaching the envious position of having growth rates close to or even higher than inflation rates. While it may be early to celebrate, there are good reasons to expect the continuation of these initial successes. The key reason is perhaps a better and socially widespread understanding of the real sources of growth and prosperity. This understanding has led to the design of strong and clear laws and institutions aimed at protecting that elusive entity, the public good. One aspect of these reforms of exceptional importance for the sustainability of economic growth and development remains clear: a stable macroeconomic environment1 Macroeconomic stability requires sound fiscal and monetary policies, preferably crystallized in a legal framework of transparent budgetary practices and an independent central bank. This was not the case in Latin America until recently. In fact, the traditional conceptual background on macroeconomic issues in the region was not one of strict adherence to a stable monetary environment, but rather one of credit policies aimed at stimulating the economy. In the pleasant world economic climate of the 50s and 6Os, this“development” bias was not a serious handicap. Inflation rates were high but not explosive, and growth was adequate. With the oil-and-interest shock of the 70s and early 8Os, however, inflation rates skyrocketed and growth rates plunged. The 80s were, for the most part, a decade spent dealing with these problems. Growth was non-existent, and standards of living declined throughout the region. But not all was lost: the travails of adjustment and reform are leaving behind many lessons which will surely be beneficial going forward. At the macroeconomic level, the main lesson can be stated quite simply: expansionary aggregate demand policies cannot buy permanently higher growth. In fact, the inflation and uncertainty these policies generate can be a detriment to growth. Central Bank Independence Exchange-Rate Regime
and the
The literature on central banking goes back a long way. Let me pick as a starting point of this brief discussion the debate
Summer1994
67
on rules versus discretion. with Friedman and Phelps has moved
decisively
Over the last 27 years, beginning in 1967, the academic pendulum
in the direction
policy is seen as one instrument one objective, namely, monetary been further
strengthened
of rules. Monetary
which should take care of stability. The argument has
by a clear understanding
of the
time inconsistency problem (i.e., the inflationary bias which arises from the central bank’s ability to inflate the economy in the short employment
run and obtain
a temporary
output
gain). In the long run, as there
and
is no such
optimum currency area) calls for high factor mobility and flexible fiscal transfers within the monetary area. Capital mobility restricted
is extremely high nowadays, but labor mobility is and fiscal transfers across countries non-existent.
Is it then the case that fixed exchange avoided in Latin America? The traditional
optimum
rates should
currency
be
area argument
implicitly takes as its starting point a stable economy. This is not always the case. For a chronically inflationary economy, an additional
argument
for a fixed exchange-rate
regime
sustainable trade off, this policy is sub-optimal, and should therefore be avoided by forcing the central bank to obey a
may be the added credibility that can be obtained by borrowing from another currency’s credibility. But one
fixed rule. In practice
should this prescription
has to be adapted
in view of
not be superficial
here; without
a sound fiscal regime
the enormous difficulties associated with the implementation of a monetary rule. The main problem is very basic:
in place, the exchange rate peg will not be credible. An additional test for the adoption of a fixed exchange rate should therefore be whether for the same fiscal perfor-
financial innovation select a stable target
mance the disinflation program can be implemented more efficiently with a currency peg than without it. One is
back into the picture, the day-to-day
and deregulation make it impossible to monetary aggregate. Discretion sneaks no longer
at the objective
level of implementation.
level, but at
According
Sayers, this is in fact the essence of central banking: discretionary control of the monetary system.2
to R. S. the
hard-pressed to find a successful stabilization episode which did not use the exchange rate as a tool. This is not enough to pass our test, however, as in many cases the exchange rate was pegged (or pre-announced) only during a transition
In this context, one should think of an independent central bank as an efficient arrangement to carry out the
period.
desirable
The Experiences of Six Latin-American
social objective
fundamental
of price stability.
This is a basic and
the central bank has to be independent to pursue a given objective. An independent central bank
no simple
matter. Countries
point:
works because it is immune from short-term political pressures and, therefore, it is better positioned to avoid pitfalls (e.g. the time inconsistency problem). When reviewing the recent reforms implemented Latin-American
This is obviously
nations,
I will specifically
by
focus on the
The successful countries all have independent central banks. But Mexico did not have an independent central bank during its stabilization effort, while Venezuela, a failure thus far, has had one since the end of 1992. Evidently an independent central bank is no panacea for curing inflation. What seems to be clear from an a priori standpoint is that,
statutory objectives of the central bank as a key institutional feature. Indeed, in his excellent book, Central Banking
after a country
Strategy, Credibility and Independence,
ground typically conquered at great social cost. The issue therefore is really one of identification: countries that want
stresses
the objectives
of the central
Alex Cukierman bank as one of the
important formal measures of independence.3 The other crucial measure is the job stability of those assigned to carry out the objective. Other aspects include the limits imposed on central bank financing of the government, the ability to formulate monetary policy, and the definition of exchange rate policy. The choice of the exchange-rate regime is in itself a theme worth revisiting. A central bank can pursue a price stability target directly (while allowing the exchange rate to float), or indirectly by pegging it to a stable currency. The classic test for the adoption of a fixed exchange-rate regime (an
68
central
succeeds in stabilizing, an independent bank works like a ratchet, avoiding giving back
to get rid of inflation are the ones which are willing to give up on the use of the central bank for purposes other than maintaining a stable macroeconomic environment. In Argentina a rigid bi-monetary regime has been in place since 1991, with a dollar/peso standard tieing the hands of the Central Bank. The Central Bank has as its objective the preservation of the value of the currency in accordance with the Convertibility Law, which irrevocably fixed the exchange rate. The Central Bank behaves as a currency board, i.e., the issuance of pesos responds automatically and, within narrowly defined limits, one-for-one to changes
The Columbia Journal of World Business
in foreign exchange reserves. There is no room for sterilization of balance of payments surpluses. The Argentine model has been extraordinarily successful. Convertibility has been credibly backed by broad and deep economic reforms which included privatization, fiscal and structural reforms, and much more. Growth has been spectacular, fueled mainly by capital inflows. The monetary regime has performed well in this favorable environment, but a real test still lies ahead. Brazil’s performance in the 80s has been subpar in just about every aspect. The Central Bank of Brazil has been a historical victim of a weak institutional architecture. From multiple government budgets (including a monetary budget), to subsidized credits, to politically motivated lending to insolvent state and federal financial institutions, the Central Bank was always called upon to foot the bill. It is no wonder that Brazil has been on a near hyper-inflationary path for years. Things have improved somewhat over the last 10 years: the monetary budget no longer exists, subsidized credits have been eliminated, and more, although not nearly enough. The constitution of 1988 did include an article (#192) which significantly augments the independence of the Central Bank, but the laws specifying how the article is to be implemented are still to be enacted. As this paper is being written, the Central Bank of Brazil remains handicapped by a weak mandate, incapable of carrying on with its role in the task maintaining a stable macroeconomic environment. Brazil’s growth-addicted economy has been shivering in pain for the last 13 years. After struggling for many years, Chile has become a phenomenal success story across the economic and political fronts. High growth, relatively low inflation, smooth elections, Chile has it all. The Central Bank of Chile was the first to be given autonomy way back in 1989. Its main objective is to maintain the purchasing power of the currency. The President and Board can only be dismissed if they fail to achieve this appropriately narrow objective. The Central Bank is forbidden to lend to the government (i.e., no open market operations with government bonds, as it cannot hold any). Exchange rate policy is also the province of the Central Bank. Evidently the Central Bank in Chile is extremely well equipped to perform its duties, and it has done so quite efficiently. Colombia may be the least talked about economy in the region, perhaps because its economic performance never got as low as that of the other main Latin countries. As a result, Colombia never had to make a spectacular
Summer I994
comeback. Its approach to monetary and exchange-rate management has been rather gradual and conservative, much like Chile’s. The Bank of The Republic was given autonomy in December of 1993, with the objective of maintaining the purchasing power of money and, quite interestingly, with an explicit obligation to set inflation targets always below the most recent results. Inflation is still in the 20% range, but prospects for a gradual reduction are very good. Mexico has also taken a gradual approach to stabilization. It involved the classic fiscal and monetary foundations side by side with a price, wage and exchange rate Pacto designed to reduce the costs of breaking the inflationary momentum. Inflation is now in the single digits, but growth has so far been modest. The Bank of Mexico has played a key role throughout the process, having served as solid anchor long before it was given formal autonomy in December 1993. Its new bylaws make the maintenance of the purchasing power of the currency the primary objective of the bank, an explicit recognition of the importance of the institutional arrangement for the preservation of the impressive results achieved over a decade. Venezuela has so far been unable to stabilize its economy and jump back into a growth trajectory. Structural and macroeconomic reforms were initiated during the 19891991 period, only to be followed by a politically driven stalemate and an economic slowdown. The Central Bank was made independent in December 1992, just in time to help the country sail through the turbulence which preceded and followed the impeachment of the President in 1993. The stabilizing importance of having an independent Central Bank was clear to the naked eye during this period. It is perhaps interesting to note that the Central Bank performed its role of guardian of the currency despite a somewhat broad and therefore weaker set of primary objectives:“to maintain conditions favorable to the stability of money, economic equilibrium and orderly development of the economy, as well as to assure the continuity of the international payments of the country” (my translation). The President of the Republic can dismiss the President and Directors of the Central Bank for not performing in accordance with their objectives. Conclusions
A careful examination mented by Argentina,
of the institutional reforms impleChile, Colombia, and Mexico, the
69
four countries that managed to stabilize their economies, indicates that these successes are likely to be durable. The reforms range from macro to micro, including a clean architecture of the central bank. All four have given autonomy to their respective central banks, with a clear currency stability objective, as well as a strong mandate to pursue it. While all four share many fundamental aspects of their reform programs, there are important differences which deserve to be highlighted. Argentina and Mexico pursued aggressive stabilization efforts based on the use of the exchange rate as an anchor. As a result, their currencies appreciated and their current accounts went into significant deficits. These deficits are healthier than those of the 7Os, mainly because they are driven by private rather than public borrowing, but it is still too early to rule out future balance of payments problems. Chile and Colombia have been less successful on the inflation front, but have been able to avoid
1 The influence of macroeconomic policies on economic growth has been the focus of a growing number of studies. For an excellent review of theory and evidence, see Fischer, S. Does Macroeconomic Policy Matter?, Occasional Papers Number 27, International Center for Economic Growth, 1993. 2 Sayers, R. S., Central BankingAfterBagehot, endon Press, Oxford, 1957.
70
Clar-
the dependence on short-term capital flows observed in Argentina and, especially, in Mexico.4 Some dependence on foreign capital is natural and desirable for a growing developing economy. Exactly how dependent an economy should be is not an easy question, but just as leverage acts as a device to discipline management at the corporate level, external debt can act as a healthy policy constraint at the macroeconomic level’ In fact, the recent experiences of the main Latin-American economies make clear that good and consistent management of government policies is the key to success. The next challenge for these economies, as the Chiapas insurrection in Mexico and the recent Colosio assassination have made obvious for all to see, is to make sure that society as a whole benefits from the aggregate gains obtained so far. With sound economic institutions such as transparent budgets and autonomous central banks, hopes are high that this will be possible.
3 Cukietman, A., Central Bank Strategy, Credibility and Independence, The MIT Press, Cambridge MA, 1992.
5 As the saying goes in Brazil,“inflation the balance of payments kills”.
cripples, but
4 The topic is discussed by G.A. Calve, L. Liederman and C. Reinhart,“The Capital Inflows Problem: Concepts and Issues,” IMF Paper on Policy Analysis and Assessment, July 1993.
The Columbia Journal of World Business
Stabilization and structural reform that has characterized Latin America as of late is based upon an increasing adherence to sound fiscal and monetary policies. The economic deprivation brought ozzby the debt crisis has served as a powerful impetus behind these developments. The macroeconomic policies leading up to the crisis have been put aside in favor of a legal framework of transparent budgetary practices and an independent central bank. Fraga’s article analyzes the recent evolution of the central banks in Argentina, Brazil, Chile, Colombia, Mexico and Venezuela.
Artninio Fraga is a Managing Director at Sores Fund Management. His primary responsibility is portfolio management and strategies for emerging markets. He is also an Adjunct Professor at the School of International and Public Affairs at Columbia University. Prior to joining Sores Fund Management in early 1993, Fraga served as a Board member and Director of International Affairs for the Central Bank of Brazil. He has worked for Salomon Brothers and for Bunco de Investimentos Garantia in Rio de Janeiro. Fraga holds a Ph.D. in economics from Princeton University.
After the lost decade of the 198Os, Latin America is getting back on track. Stabilization and structural reform are the guiding themes behind economic policies from the Rio Grande down to the Strait of Magellan. Results so far are extremely encouraging, with a few countries approaching the envious position of having growth rates close to or even higher than inflation rates. While it may be early to celebrate, there are good reasons to expect the continuation of these initial successes. The key reason is perhaps a better and socially widespread understanding of the real sources of growth and prosperity. This understanding has led to the design of strong and clear laws and institutions aimed at protecting that elusive entity, the public good. One aspect of these reforms of exceptional importance for the sustainability of economic growth and development remains clear: a stable macroeconomic environment1 Macroeconomic stability requires sound fiscal and monetary policies, preferably crystallized in a legal framework of transparent budgetary practices and an independent central bank. This was not the case in Latin America until recently. In fact, the traditional conceptual background on macroeconomic issues in the region was not one of strict adherence to a stable monetary environment, but rather one of credit policies aimed at stimulating the economy. In the pleasant world economic climate of the 50s and 6Os, this“development” bias was not a serious handicap. Inflation rates were high but not explosive, and growth was adequate. With the oil-and-interest shock of the 70s and early 8Os, however, inflation rates skyrocketed and growth rates plunged. The 80s were, for the most part, a decade spent dealing with these problems. Growth was non-existent, and standards of living declined throughout the region. But not all was lost: the travails of adjustment and reform are leaving behind many lessons which will surely be beneficial going forward. At the macroeconomic level, the main lesson can be stated quite simply: expansionary aggregate demand policies cannot buy permanently higher growth. In fact, the inflation and uncertainty these policies generate can be a detriment to growth. Central Bank Independence Exchange-Rate Regime
and the
The literature on central banking goes back a long way. Let me pick as a starting point of this brief discussion the debate
Summer1994
67
on rules versus discretion. with Friedman and Phelps has moved
decisively
Over the last 27 years, beginning in 1967, the academic pendulum
in the direction
policy is seen as one instrument one objective, namely, monetary been further
strengthened
of rules. Monetary
which should take care of stability. The argument has
by a clear understanding
of the
time inconsistency problem (i.e., the inflationary bias which arises from the central bank’s ability to inflate the economy in the short employment
run and obtain
a temporary
output
gain). In the long run, as there
and
is no such
optimum currency area) calls for high factor mobility and flexible fiscal transfers within the monetary area. Capital mobility restricted
is extremely high nowadays, but labor mobility is and fiscal transfers across countries non-existent.
Is it then the case that fixed exchange avoided in Latin America? The traditional
optimum
rates should
currency
be
area argument
implicitly takes as its starting point a stable economy. This is not always the case. For a chronically inflationary economy, an additional
argument
for a fixed exchange-rate
regime
sustainable trade off, this policy is sub-optimal, and should therefore be avoided by forcing the central bank to obey a
may be the added credibility that can be obtained by borrowing from another currency’s credibility. But one
fixed rule. In practice
should this prescription
has to be adapted
in view of
not be superficial
here; without
a sound fiscal regime
the enormous difficulties associated with the implementation of a monetary rule. The main problem is very basic:
in place, the exchange rate peg will not be credible. An additional test for the adoption of a fixed exchange rate should therefore be whether for the same fiscal perfor-
financial innovation select a stable target
mance the disinflation program can be implemented more efficiently with a currency peg than without it. One is
back into the picture, the day-to-day
and deregulation make it impossible to monetary aggregate. Discretion sneaks no longer
at the objective
level of implementation.
level, but at
According
Sayers, this is in fact the essence of central banking: discretionary control of the monetary system.2
to R. S. the
hard-pressed to find a successful stabilization episode which did not use the exchange rate as a tool. This is not enough to pass our test, however, as in many cases the exchange rate was pegged (or pre-announced) only during a transition
In this context, one should think of an independent central bank as an efficient arrangement to carry out the
period.
desirable
The Experiences of Six Latin-American
social objective
fundamental
of price stability.
This is a basic and
the central bank has to be independent to pursue a given objective. An independent central bank
no simple
matter. Countries
point:
works because it is immune from short-term political pressures and, therefore, it is better positioned to avoid pitfalls (e.g. the time inconsistency problem). When reviewing the recent reforms implemented Latin-American
This is obviously
nations,
I will specifically
by
focus on the
The successful countries all have independent central banks. But Mexico did not have an independent central bank during its stabilization effort, while Venezuela, a failure thus far, has had one since the end of 1992. Evidently an independent central bank is no panacea for curing inflation. What seems to be clear from an a priori standpoint is that,
statutory objectives of the central bank as a key institutional feature. Indeed, in his excellent book, Central Banking
after a country
Strategy, Credibility and Independence,
ground typically conquered at great social cost. The issue therefore is really one of identification: countries that want
stresses
the objectives
of the central
Alex Cukierman bank as one of the
important formal measures of independence.3 The other crucial measure is the job stability of those assigned to carry out the objective. Other aspects include the limits imposed on central bank financing of the government, the ability to formulate monetary policy, and the definition of exchange rate policy. The choice of the exchange-rate regime is in itself a theme worth revisiting. A central bank can pursue a price stability target directly (while allowing the exchange rate to float), or indirectly by pegging it to a stable currency. The classic test for the adoption of a fixed exchange-rate regime (an
68
central
succeeds in stabilizing, an independent bank works like a ratchet, avoiding giving back
to get rid of inflation are the ones which are willing to give up on the use of the central bank for purposes other than maintaining a stable macroeconomic environment. In Argentina a rigid bi-monetary regime has been in place since 1991, with a dollar/peso standard tieing the hands of the Central Bank. The Central Bank has as its objective the preservation of the value of the currency in accordance with the Convertibility Law, which irrevocably fixed the exchange rate. The Central Bank behaves as a currency board, i.e., the issuance of pesos responds automatically and, within narrowly defined limits, one-for-one to changes
The Columbia Journal of World Business
in foreign exchange reserves. There is no room for sterilization of balance of payments surpluses. The Argentine model has been extraordinarily successful. Convertibility has been credibly backed by broad and deep economic reforms which included privatization, fiscal and structural reforms, and much more. Growth has been spectacular, fueled mainly by capital inflows. The monetary regime has performed well in this favorable environment, but a real test still lies ahead. Brazil’s performance in the 80s has been subpar in just about every aspect. The Central Bank of Brazil has been a historical victim of a weak institutional architecture. From multiple government budgets (including a monetary budget), to subsidized credits, to politically motivated lending to insolvent state and federal financial institutions, the Central Bank was always called upon to foot the bill. It is no wonder that Brazil has been on a near hyper-inflationary path for years. Things have improved somewhat over the last 10 years: the monetary budget no longer exists, subsidized credits have been eliminated, and more, although not nearly enough. The constitution of 1988 did include an article (#192) which significantly augments the independence of the Central Bank, but the laws specifying how the article is to be implemented are still to be enacted. As this paper is being written, the Central Bank of Brazil remains handicapped by a weak mandate, incapable of carrying on with its role in the task maintaining a stable macroeconomic environment. Brazil’s growth-addicted economy has been shivering in pain for the last 13 years. After struggling for many years, Chile has become a phenomenal success story across the economic and political fronts. High growth, relatively low inflation, smooth elections, Chile has it all. The Central Bank of Chile was the first to be given autonomy way back in 1989. Its main objective is to maintain the purchasing power of the currency. The President and Board can only be dismissed if they fail to achieve this appropriately narrow objective. The Central Bank is forbidden to lend to the government (i.e., no open market operations with government bonds, as it cannot hold any). Exchange rate policy is also the province of the Central Bank. Evidently the Central Bank in Chile is extremely well equipped to perform its duties, and it has done so quite efficiently. Colombia may be the least talked about economy in the region, perhaps because its economic performance never got as low as that of the other main Latin countries. As a result, Colombia never had to make a spectacular
Summer I994
comeback. Its approach to monetary and exchange-rate management has been rather gradual and conservative, much like Chile’s. The Bank of The Republic was given autonomy in December of 1993, with the objective of maintaining the purchasing power of money and, quite interestingly, with an explicit obligation to set inflation targets always below the most recent results. Inflation is still in the 20% range, but prospects for a gradual reduction are very good. Mexico has also taken a gradual approach to stabilization. It involved the classic fiscal and monetary foundations side by side with a price, wage and exchange rate Pacto designed to reduce the costs of breaking the inflationary momentum. Inflation is now in the single digits, but growth has so far been modest. The Bank of Mexico has played a key role throughout the process, having served as solid anchor long before it was given formal autonomy in December 1993. Its new bylaws make the maintenance of the purchasing power of the currency the primary objective of the bank, an explicit recognition of the importance of the institutional arrangement for the preservation of the impressive results achieved over a decade. Venezuela has so far been unable to stabilize its economy and jump back into a growth trajectory. Structural and macroeconomic reforms were initiated during the 19891991 period, only to be followed by a politically driven stalemate and an economic slowdown. The Central Bank was made independent in December 1992, just in time to help the country sail through the turbulence which preceded and followed the impeachment of the President in 1993. The stabilizing importance of having an independent Central Bank was clear to the naked eye during this period. It is perhaps interesting to note that the Central Bank performed its role of guardian of the currency despite a somewhat broad and therefore weaker set of primary objectives:“to maintain conditions favorable to the stability of money, economic equilibrium and orderly development of the economy, as well as to assure the continuity of the international payments of the country” (my translation). The President of the Republic can dismiss the President and Directors of the Central Bank for not performing in accordance with their objectives. Conclusions
A careful examination mented by Argentina,
of the institutional reforms impleChile, Colombia, and Mexico, the
69
four countries that managed to stabilize their economies, indicates that these successes are likely to be durable. The reforms range from macro to micro, including a clean architecture of the central bank. All four have given autonomy to their respective central banks, with a clear currency stability objective, as well as a strong mandate to pursue it. While all four share many fundamental aspects of their reform programs, there are important differences which deserve to be highlighted. Argentina and Mexico pursued aggressive stabilization efforts based on the use of the exchange rate as an anchor. As a result, their currencies appreciated and their current accounts went into significant deficits. These deficits are healthier than those of the 7Os, mainly because they are driven by private rather than public borrowing, but it is still too early to rule out future balance of payments problems. Chile and Colombia have been less successful on the inflation front, but have been able to avoid
1 The influence of macroeconomic policies on economic growth has been the focus of a growing number of studies. For an excellent review of theory and evidence, see Fischer, S. Does Macroeconomic Policy Matter?, Occasional Papers Number 27, International Center for Economic Growth, 1993. 2 Sayers, R. S., Central BankingAfterBagehot, endon Press, Oxford, 1957.
70
Clar-
the dependence on short-term capital flows observed in Argentina and, especially, in Mexico.4 Some dependence on foreign capital is natural and desirable for a growing developing economy. Exactly how dependent an economy should be is not an easy question, but just as leverage acts as a device to discipline management at the corporate level, external debt can act as a healthy policy constraint at the macroeconomic level’ In fact, the recent experiences of the main Latin-American economies make clear that good and consistent management of government policies is the key to success. The next challenge for these economies, as the Chiapas insurrection in Mexico and the recent Colosio assassination have made obvious for all to see, is to make sure that society as a whole benefits from the aggregate gains obtained so far. With sound economic institutions such as transparent budgets and autonomous central banks, hopes are high that this will be possible.
3 Cukietman, A., Central Bank Strategy, Credibility and Independence, The MIT Press, Cambridge MA, 1992.
5 As the saying goes in Brazil,“inflation the balance of payments kills”.
cripples, but
4 The topic is discussed by G.A. Calve, L. Liederman and C. Reinhart,“The Capital Inflows Problem: Concepts and Issues,” IMF Paper on Policy Analysis and Assessment, July 1993.
The Columbia Journal of World Business