What’s In a Name? That Which We Call Capital Controls

February 12, 2016

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Format: Chicago

Atish R. Ghosh, and Mahvash S Qureshi. What’s In a Name? That Which We Call Capital Controls, (USA: International Monetary Fund, 2016) accessed April 7, 2025

Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary

This paper investigates why controls on capital inflows have a bad name, and evoke such visceral opposition, by tracing how capital controls have been used and perceived, since the late nineteenth century. While advanced countries often employed capital controls to tame speculative inflows during the last century, we conjecture that several factors undermined their subsequent use as prudential tools. First, it appears that inflow controls became inextricably linked with outflow controls. The latter have typically been more pervasive, more stringent, and more linked to autocratic regimes, failed macroeconomic policies, and financial crisis—inflow controls are thus damned by this “guilt by association.” Second, capital account restrictions often tend to be associated with current account restrictions. As countries aspired to achieve greater trade integration, capital controls came to be viewed as incompatible with free trade. Third, as policy activism of the 1970s gave way to the free market ideology of the 1980s and 1990s, the use of capital controls, even on inflows and for prudential purposes, fell into disrepute.

Subject: Balance of payments, Capital account, Capital controls, Capital flows, Capital inflows, Capital outflows, Exchange restrictions, Foreign exchange

Keywords: Bretton Woods, Capital control, Capital controls, Capital flows, Capital inflows, Capital outflows, East Asia, Emerging market, Europe, Exchange restrictions, Financial crisis, Global, Gold standard, Hot money, Inflow control, Interwar period, Net capital, Outflow control, WP

Publication Details

Pages:

45
Volume:

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DOI:

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Issue:

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Series:

Working Paper No. 2016/025
Stock No:

WPIEA2016025
ISBN:

9781498332835
ISSN:

1018-5941

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