Le Prix de L'argent: How (Not) to Deal with Capital Inflows

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Periodical article

Title:	Le Prix de L'argent: How (Not) to Deal with Capital Inflows
Authors:	Asea, Patrick K. Reinhart, Carmen M.
Year:	1996
Periodical:	Journal of African Economies
Volume:	5
Issue:	3
Pages:	231-271
Language:	English
Geographic terms:	Ghana Uganda Kenya Zimbabwe Africa
Subjects:	finance capital movements Economics and Trade
Abstract:	How should governments respond to huge surges in private capital inflows? Evidence on the effectiveness of activist policies from several Latin American and Asian countries is mixed. The present paper supplements this evidence by analysing the causes and consequences of capital inflows for four African countries - Ghana, Kenya, Uganda and Zimbabwe. Some of these countries, notably Kenya and Uganda, have experienced heavy capital inflows in response to improvements in economic performance. Failure to deal appropriately with the capital inflows may derail the significant structural reform programmes undertaken in these countries. The article demonstrates that for countries without developed domestic financial markets 'doing nothing' in response to a surge in capital inflows may be less problematic than sterilized intervention. Bibliogr., notes, ref., sum. (Comments by Ibrahim A. Elbadawi, p. 272-275.)