Chapter 7: Should capital controls have a place in the future international monetary system?
Stephany Griﬃth-Jones, John Williamson and Ricardo Gottschalk INTRODUCTION Capital account convertibility – the complete elimination of all capital controls – was often treated in the 1990s as an integral element of the market liberalization that was being urged on emerging markets. In the middle of the decade there was even talk of making it an objective of international policy that would be embodied (as a long-term target) in the IMF Articles. The Asian crisis brought sharp disillusionment, and since then opinion has tended to swing back to acceptance that emerging markets may be ill advised to seek the rapid elimination of capital controls. But that has not brought with it any consensus as to the future role of capital controls in the international monetary system. This chapter aims to take stock of this debate. The next section (which is elaborated in Appendix 7A) reviews the main trends in the use of capital controls over the last decade. The third section discusses whether there is still a role for controls, and considers which forms of controls seem most apt under current world conditions of relatively free markets. The next section explores the possibility of developing measures aimed at promoting inﬂows to emerging markets in times of drought like the present. The chapter concludes by sketching a set of proposals for international policy in this area in the coming years. RECENT TRENDS IN CAPITAL ACCOUNT POLICY Despite the loss of enthusiasm for propagating capital account liberalization, the trend has remained very much...
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