In particular, short-term cross-border debt flows should be the last item on the
liberalization list, since these instruments are particularly prone to volatility and panic. Chile=s taxation of short-term capital inflows (by requiring a partial deposit of the foreign investment in a non-interest earning account for one year) provides a promising example for other emerging markets. Chile=s restrictions have reduced short-term capital inflows to Chile, without reducing total capital inflows. Many analysts attribute Chile=s ability to avoid financial crises in the wake of the panics in Mexico, Argentina, and Asia to these restrictions and Chile=s small stock of short-term foreign debt. These restrictions are best seen as temporary measures to protect financial markets from severe crises until the necessary institutional framework is in place.