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Published by: Darden Business Publishing
Published in: 2002

Abstract

In the early 1990s the Chilean government restricted the flow of capital in the country in order to achieve a competitive and stable exchange rate and control inflation; by the late 1990s, with the Asian Crisis, the risk aversive behavior of foregin investors caused a slowdown in inflow of foreign capital to such an extent that the country risked a slowdown in industrial activity and a drain on foreign reserves. The government must decide what to do.

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Abstract

In the early 1990s the Chilean government restricted the flow of capital in the country in order to achieve a competitive and stable exchange rate and control inflation; by the late 1990s, with the Asian Crisis, the risk aversive behavior of foregin investors caused a slowdown in inflow of foreign capital to such an extent that the country risked a slowdown in industrial activity and a drain on foreign reserves. The government must decide what to do.

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