This paper analyzes the evolution and impact of capital flows in Colombia over the pastfive years. An examination of the nature and composition of the capital flows indicatesthat to large extent they have originated in foreign direct investment, especially in theoil and mining sectors. The repercussions of capital flows for the stabiliTY and fragilityof the financial system are also discussed. Finally, some of the challenges faced by theauthorities in dealing with the implications of capital flows for the conduct of monetaryand exchange rate policies are presented.
