Soft Currencies, Hard Landings
Edited by Gerald A. Epstein
Chapter 5: Capital controls in a time of crisis
The chapter highlights five factors that have contributed to the evolving rebranding of capital controls during the global crisis. These are: (1) the rise of increasingly autonomous developing states; (2) the increasing assertiveness of their policymakers; (3) a pragmatic adjustment by the IMF to its constrained geography of influence; (4) the need for controls not just by countries facing fragility or implosion, but also by those that fared “too well” during the crisis; and (5) the evolution in the ideas of academic economists and IMF staff. The chapter also explores tensions around rebranding as exemplified by efforts to develop a hierarchy in which controls on inflows that are a last resort and are targeted, temporary, and non-discriminatory are more acceptable than those that are blunt, enduring, discriminatory, and that target outflows. In addition, tensions have increasingly emerged over whether controls should be used by capital-source rather than just capital-recipient countries.
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