How Effective Are Capital Controls?
- (pp. 65-84)
AbstractA number of authors have recently argued that, in order to avoid financial instability, emerging countries should rely on capital controls. Two type of controls have been considered: controls on capital outflows, and controls on capital inflows. In this paper I review the historical evidence on the effectiveness of these two type of controls. I argue that controls on outflows have been ineffective. They are circumvented and breed corruption. I also analyze Chile's recent experience with controls on inflows, and I argue that their effectiveness has been exaggerated.
Citation1999. "How Effective Are Capital Controls?" Journal of Economic Perspectives, 13(4): 65-84. DOI: 10.1257/jep.13.4.65
- F32 Current Account Adjustment; Short-term Capital Movements
- O16 Economic Development: Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
- O19 International Linkages to Development; Role of International Organizations