Alfonso Prat-Gay on Capital Flows and Investment

COUNCIL OF THE AMERICAS

Conferencia del Presidente del Banco Central en la 33rd Annual Washington Conference of the Americas Society.
Prat-Gay expone sobre los flujos de capitales y como se debería lidiar con ellos.
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Sus conclusiones:

Weak institutions
Lack of policy tools
Small is not beautiful (sudden stops)
IFIs can be twice procyclical.
All you need is FDI but: last to come, mostly a convergence trade

A huge policy challenge
Hard Pegs do not buy fiscal discipline
Floats do not eliminate capital flow volatility
Tax capital inflows?

Financial system
How much nominal exchange-rate risk?
Regulatory framework must capture real exchange risk
Minimize the rotten-apple effect of large/public banks