Can Capital Controls Help Developing Countries Cope with Global Financial Instability?
The recent financial crisis has reignited debate on capital controls. Before the crisis, most financial institutions believed government control of the inflows of capital was bad for a nation’s economy and credit rating. During the crisis, however, several countries, including Brazil, Colombia, Thailand and Malaysia among others, imposed capital controls that helped reduce economic volatility. This has cleared the stigma that capital controls are bad for the economy, according to a distinguished panel of experts hosted by Carnegie. Marcos Chamon, an economist at the IMF, highlighted the findings of a recent IMF Staff Position Note on controls in capital inflows and Jorge Arbache, a senior economic advisor to the president of Brazil’s National Development Bank (BNDES), and Boston University’s Kevin Gallagher discussed the policy space available to developing countries for imposing capital controls. Carnegie’s Eduardo Zepeda moderated.
Related Questions
- Do developing countries need ‘good’ institutions and policies and deep financial markets to benefit from capital account liberalization?
- Can reforming global institutions help developing countries share more in the benefits from globalization?
- Why do developing countries resist global trade agreements?
