Stemming the Tide: Capital Account Regulations in Developing and Emerging Countries
This chapter examines the evolution of capital controls in developing and emerging countries (DECs). It provides a summary of the definition of capital controls, their rationale in different economic paradigms, and historical evolution. It then analyses t
- PDF / 728,449 Bytes
- 44 Pages / 419.53 x 595.28 pts Page_size
- 19 Downloads / 183 Views
stract This chapter examines the evolution of capital controls in developing and emerging countries (DECs). It provides a summary of the definition of capital controls, their rationale in different economic paradigms, and historical evolution. It then analyses the most recent controls implemented in the wake and aftermath of the global financial crisis in 2008. It argues that rather than fundamentally questioning the benefits of open capital accounts, these measures were imposed as a last resort given the inherent contradictions of the conventional macroeconomic configuration. Controls have remained market-based, temporary and frequently disguised as macroprudential regulations to deal with the worst implications of free capital account convertibility. As such, they have sought to safeguard the general openness to cross-border capital. The chapter also argues that given the inherent instability of international financial markets and the structural subordination DECs assume in them, capital controls need to be permanent, comprehensive and institutionalised development instruments. A. Kaltenbrunner () Leeds University Business School, Maurice Keyworth Building, University of Leeds, Leeds LS2 9JT, UK © The Author(s) 2016 P. Arestis, M. Sawyer (eds.), Financial Liberalisation, DOI 10.1007/978-3-319-41219-1_7
265
266
A. Kaltenbrunner
Keywords Developing and emerging countries • Capital controls • Macroeconomic policy • Development policy JEL Classifications F31 • F32 • O11
7.1
Introduction
Capital controls are on the agenda again. Large swings of cross-border capital flows and consequent exchange rate pressures, credit market overheating and new forms of external vulnerability have put the benefits of free capital accounts once again into doubt. Over recent years, several developing and emerging countries (DECs) have taken a bolder stance towards re-regulating the free movement of international capital flows. Moreover, these measures have changed, becoming more sophisticated, variegated and macroprudential. At the same time, the international community, not least the International Monetary Fund (IMF), seems to have changed its attitude towards capital controls. From a rejection at all terms, international financial institutions (IFIs) have moved to a cautious acceptance given specific circumstances and conditions. This chapter relates to this ‘new normal’ (Grabel 2017) of capital controls in two ways. First, it provides a comprehensive overview and summary of the issues regarding capital controls in DECs. It does so on the basis of conceptual, theoretical, and historical grounds. Second, it places particular emphasis on the most recent waves of capital controls and analyses whether they represent a structural shift in the attitude towards free capital accounts. It asks the questions of how do recent controls differ, what has changed, and do they indeed represent a new era of financial globalization? In contrast to the existing literature, rather than analysing the attitude of the international community (in parti
Data Loading...
