Capital control
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In economics, capital control is the monetary policy device that a country's government (i.e., sovereign power) uses to regulate the flows into and out of a country's capital account, i.e., the flows of investment-oriented money into and out of a country or currency. The decade since the Asian Currency Crisis in 1997-1998 has rekindled debate over the wisdom of developing markets having capital controls. As globalization advanced with the formalization of the World Trade Organization and Uruguay Round of General Agreement on Tariffs and Trade (GATT), developing countries were urged by the International Monetary Fund and others to liberalize their capital controlled environments.
As it became clear that countries doing this, including Malaysia, Thailand and Mexico, essentially ceded control of their economies to external forces, namely international capital movements, hot money and capital flight; and countries that did not, like China and India, retained control and were not nearly as vulnerable to the volatility of international capital movement, some argued that capital controls were advisable for smaller economies to use, and to transition away from them only over long, general evolutionary timelines. Malaysia is an example of a country that switched regimes, from open in the late 1990s, to closed. Economists supporting capital controls in certain cases were not only from the left, but also liberal economists like Jagdish Bhagwati [1] and news publications like The Economist[2].
[edit] Free movement of capital and payments
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[edit] External links
- Christopher J. Neely, An introduction to capital controls (PDF), Federal Reserve Bank of St. Louis Review, November/December 1999, pp. 13-30
- James Oliver, What are Capital Controls?, University of Iowa Center for International Finance & Development
- Ethan Kaplan, Dani Rodrik (2001) Did the Malaysian capital controls work? NBER Working Paper No. 8142
[edit] References
- ^ Jagdish Bhagwati (2004) In defense of Globalization. Oxford University Press; pp.199-207
- ^ The Economist (2003) A place for capital controls
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