2013年-IMF国际货币组织全球_Capital_Account_Policies_in_Chile_Macro_32页_2mb

Summary of "Capital Account Policies in Chile"

Core Content

This paper analyzes Chile's experience with capital account policies since the 1990s, focusing on how different macroeconomic and capital account frameworks affected the country's response to two major external shocks: the 1997-98 Asian-LTCM-Russian crisis and the 2008-09 global financial crisis. It highlights the evolution of Chile's capital account policies, the interaction between macroeconomic frameworks and capital flows, and the rationale behind the shift toward liberalization.

Main Views

• Capital Controls and Exchange Rate Stability: In the 1990s, Chile implemented capital flow measures (CFMs), such as the encaje (unremunerated reserve requirement), to manage large capital inflows and maintain a competitive exchange rate. These controls were aimed at preventing excessive appreciation of the peso and supporting export-led growth.

• Policy Regime Switch: The shift from a closed capital account to a more liberalized one began in the late 1990s, driven by domestic stability considerations, particularly the need for resilient economic growth and job creation. This transition was not solely influenced by external pressures or IMF recommendations, but rather by the domestic authorities' assessment of the economic environment.

• Monetary Policy Flexibility: The adoption of an inflation targeting framework in 2000 allowed the central bank to respond more effectively to external shocks, such as the 2008-09 crisis. This framework enabled countercyclical monetary policy and reduced the pro-cyclical nature of previous approaches.

• Capital Flows and Financial Stability: The paper emphasizes that while capital inflows can stimulate growth, they also pose risks such as real appreciation, financial vulnerabilities, and the potential for sudden outflows. The interaction between capital account policies, exchange rate flexibility, and institutional investors' behavior played a key role in shaping the macroeconomic outcomes during crisis periods.

• Exchange Rate Band and Sterilization: The Central Bank of Chile used an exchange rate band to manage the real exchange rate, adjusting it based on inflation differentials. During periods of high capital inflows, the encaje was used to sterilize the monetary impact of these flows. However, this approach imposed significant quasi-fiscal costs and limited the ability to maintain both monetary independence and exchange rate stability.

• Role of Institutional Investors: Large institutional investors, particularly pension funds (AFPs), played a crucial role in capital flows. During the 1997-98 crisis, they contributed to financial stress by shifting portfolios overseas, whereas in the 2008-09 crisis, they helped stabilize the financial system by supporting the peso through increased domestic investment.

Key Information

• Capital Account Openness: Chile's net foreign asset position improved significantly over the past two decades, moving from a large net foreign liability position in the 1990s to near balance by 2006. This reflects a more open capital account.

• Exchange Rate Policy: The exchange rate was managed within a band during the 1990s, with adjustments based on inflation differentials. The band was later abandoned in favor of a more flexible exchange rate regime under inflation targeting.

• Capital Controls: The encaje was a key tool used to manage capital inflows, initially set at 20% and later increased to 30%. It was later reduced and eventually eliminated in 1998, reflecting a policy shift toward liberalization.

• Macro-financial Interactions: The paper illustrates how the structure of capital account policies and the exchange rate regime influence the effectiveness of monetary policy. A rigid exchange rate regime with capital controls limited the central bank's ability to respond to shocks, while a more flexible regime allowed for countercyclical measures.

• Policy Implications: The experience of Chile shows that the design of capital account policies must be aligned with the broader macroeconomic framework. The shift to a more open capital account was driven by the need for domestic stability and the recognition that rigid policies were no longer sustainable.

Structure of the Paper

• I. Introduction: Sets the context by discussing the global debate on capital controls and Chile's shift from restrictive to more open policies.
• II. Aiming to secure export-led growth: Focuses on the implementation of CFMs in the 1990s and the rationale behind maintaining a stable exchange rate.
• III. Securing stability in a volatile world: Analyzes the transition to a more flexible capital account regime and the impact of the 2008-09 crisis.
• IV. Evidence for the effectiveness of capital controls: Discusses the role of capital controls in managing capital flows and their impact on macroeconomic stability.
• V. External influence on the shifting stance of Chilean capital account policies: Examines how international financial conditions and IMF recommendations influenced Chile's policy decisions.
• VI. Conclusions: Summarizes the key findings and implications of Chile's capital account policy evolution.
• VII. References: Lists the sources and references used in the paper.

Conclusion

Chile's capital account policies have evolved significantly over the past two decades, reflecting a shift from strict controls to a more liberalized framework. The paper argues that domestic stability concerns, particularly the need for resilient growth and employment, were the main drivers of this shift. The experience during the 1997-98 and 2008-09 crises highlights the importance of macroeconomic frameworks in shaping the response to external shocks and the role of capital controls in managing financial stability.