Heterodox Central Bankers III

Raúl Prebisch (1901-1986)

Raúl Prebisch on the adoption of foreign exchange controls by the Argentinean central bank in 1943:

“This capital [short-term capital] went to further inflate the categories of goods or assets that were already inflated, and did not translate, except in very rare occasions, in a real increase in the production of the country… the measures adopted by the government permit to make an exception, to allow the inflow of these capitals if it is shown that these are oriented towards the increase in real production…” (Obras, 1919-1949 Vol. IV, p. 183; General Manager, Central Bank of Argentina, 1935-1943).

In other words, short-term speculative flows should be constrained, but long-term flows for productive activities are fine.