Chapter

Capital Controls

Nicolas Magud and Carmen M. Reinhart

in Capital Controls and Capital Flows in Emerging Economies

Published by University of Chicago Press

Published in print May 2007 | ISBN: 9780226184975
Published online February 2013 | e-ISBN: 9780226184999 | DOI: http://dx.doi.org/10.7208/chicago/9780226184999.003.0015
Capital Controls

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This chapter investigates the literature on capital controls and economic performance. It presents evidence on episodes with capital controls that are not as well known as those of Chile and Malaysia. Capital controls on inflows appear to make monetary policy more independent, alter the composition of capital flows, and decrease real exchange rate pressures. These capital controls do not reduce the volume of net flows, and, hence, the current account balance. Chile emerges as the most successful example of capital controls on inflows. As long as capital flows to emerging markets remain volatile and potentially disruptive, the discussion of capital controls in academic and policy circles will remain alive, and hence there is a real need to evaluate their effectiveness, however defined.

Keywords: capital controls; economic performance; Chile; Malaysia; monetary policy; inflows; exchange rate; net flows; account balance

Chapter.  10263 words. 

Subjects: Macroeconomics and Monetary Economics

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