The URR was essentially a tax chile used on foreign inflows in the 1990s- the sh

Question

The URR was essentially a tax chile used on foreign inflows in the 1990s- the shorter the maturity the higher the "tax." if short term inflows were the lowest in 1997, why was the deposits subject to URR highest in 1997?

Exhibit 16a Gross Foreign Capital Inflows to Chile Inflows of Short-Term Capital (with maturity of one year or less) Inflows of Long-Term Capital (with maturity of more than one year) Deposits Subject to URR 1% total inflows) 1% total inflows) ($mm) ($mm) ($mm) 1988 1989 1990 1991 1992 1993 1994 1995 1996 1997 916,564 1,452,595 1,683,149 521,198 225,197 159,462 161,575 69,675 67,254 96.3 95.0 90.3 72.7 28.9 23.6 16.5 6.2 3.2 2.8 34,838 77,122 181,419 196,115 554,072 515,147 819,699 1,051,829 2,042,456 2,805,882 3.7 5.0 9.7 27.3 71.1 76.4 83.5 93.8 96.8 97.2 587 11,424 41,280 87,039 38,752 172,320 331,572 8,131

Explanation / Answer

The one of the most important reason the deposits subject to URR were highest in 1997 was that the aggregate investments including short term as well as long term flows increased significantly. It more than doubled from 1995 when the long term investments were 1051829 to 2805882 in 1997. The significant increase in deposits subjected to URR were because of drastic increase in long term foreign capital flow in Chile. The percentage contribution of 97.2% aggregated to 2805882 mm. Even if the rate of URR was to be lower on long run capital flows, the amount of these flows was large enough to be subjected to URR. The other reason can also be that the investors may have preferred a maturity of just above one year to avoid high URR on their deposits.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.