Capital Controls in Emerging Economies

By Christine Ries Hekman; Richard J. Sweeney | Go to book overview

Introduction and Overview

Christine P. Ries

Until recently, capital controls were considered by many policymakers to be among the more arcane and technical instruments of economic policy. National governments frequently imposed controls in support of balance of payments and monetary policy objectives when international capital flows threatened to overwhelm domestic policy priorities. The appropriateness of their application in these conditions, or the extension of their use to other situations, was little discussed. In the last decade, however, the power of market-based economics has swept through formerly socialist and communist countries, leading to economic and political reform in many of these states. With these changes, debates over the use of capital controls have gained new prominence since capital controls have frequently been used to sequence and fine tune liberalization policies in the emerging market economies.

The essays in this book should convince the reader that debates about the role and impact of capital controls can no longer be relegated to the offices of "policy wonks" and economists who specialize in international monetary policy. Rather, as political and economic institutions are transformed within a global setting, decisions to divert or distort the flow of global capital have pervasive and long lasting impacts on the basic structures of national economies. Capital controls are not tangential but fundamental elements of economic policy and management.

Capital controls, far from being an arcane tool for fine tuning economic policy and macroeconomic or balance of payments management, are shown to be of central relevance in determining patterns of international ownership and the character of national private investment. They can also have a significant effect on patterns of population migration and the development of national comparative advantage. They affect industrial organization at the deepest levels and so should be of concern to corporate strategists, investment portfolio managers and equity traders, and anyone concerned with such broad issues of public policy as development and growth, education, and infrastructure planning.

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Capital Controls in Emerging Economies
Table of contents

Table of contents

  • Title Page iii
  • Contents vii
  • Preface ix
  • Acknowledgments xi
  • Introduction and Overview 1
  • Notes 12
  • 1 - Orthodoxy is Right: Liberalize The Capital Account Last 13
  • Notes 16
  • 2 - Reality and the Logic Of Capital Flow Liberalization 17
  • Introduction 17
  • Notes 29
  • 3 - Preconditions for Liberalization Of Capital Flows: a Review And Interpretation 33
  • Introduction 33
  • Notes 43
  • 4 - The Information Costs Of Capital Controls 45
  • Introduction 45
  • Conclusions 54
  • References 55
  • 5 - Currency Convertibility, Policy Credibility and Capital Flight In Poland and the Czech and Slovak Federal Republic 63
  • Introduction 63
  • Notes 83
  • References 85
  • 6 - Capital Controls and Corporate Investment Behavior 89
  • Introduction 89
  • Notes 108
  • References 108
  • 7 - Capital Account Liberalization and Policy Incentives: an Endogenous Policy View 111
  • Introduction 111
  • Notes 131
  • 8 - A Payments Mechanism For The Independent States Of The Former Soviet Union 137
  • Introduction: Economic Rationale For a Payments Mechanism 137
  • References 157
  • About the Editors and Contributors 159
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