External Shocks and External Sector Trends
This chapter discusses in detail the external shocks that affected Bolivia's economic performance over the last two and a half decades. During the 1970s, Bolivia enjoyed large capital inflows from international commercial banks and increased 'official' export revenues. The country had access to levels of foreign exchange that exceeded the economy's absorption capacity. Hence, capital flight became a feature of Bolivia's external adjustment. During the 1980s, illegal sources of revenue also became important. This access to foreign exchange resulted in the tendency for the real exchange rate to appreciate in the long run, reducing export competitiveness and encouraging imports.
KeywordsExchange Rate Foreign Exchange Real Exchange Rate Capital Inflow External Shock
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