Coping with capital inflows surge : The macroeconomic impact of the capital inflows and their management with respect to Chile, Thailand and Kenya

The main objective of this paper is to conduct a descriptive comparative study on macroeconomic impacts of capital inflows and their management in Chile, Thailand, and Kenya. The surge of Capital inflows in these countries took place in different time period and had different compositions (recently mainly in the fonn of volatile short-tenn capital inflows). The capital inflows had different macroeconomic impacts because of difference in policy environment and the nature of capital composition in these countries. The inflows boost investment in Thailand and Chile (more importantly in Thailand) whereas in Kenya stimulated more consumption and surge in imports. The short-tenn capital inflows to these countries brought about appreciation of the real exchange rates, deterioration of the current account, capital flight, and uncertainty in the domestic markets. To manage these massive short-tenn capital inflows governments undertook different policy measures as prudential measures and capital controls to counteract the speculative nature of the inflows. In general, the authorities managed to attain a short-lived relief from these capital controls.