The Siren Song of Capital Controls
ITHACA, NEW YORK – Capital controls are back in vogue. Facing sharp currency appreciation and fearing asset-price booms fueled by hot money, countries such as Indonesia, Korea, and Taiwan have recently taken steps to limit inflows.
Nervous central bankers in many other emerging markets, including India, facing pressures from exporters hurt by rising exchange rates, are contemplating broader controls on capital inflows as well. Earlier this year, the International Monetary Fund came out in favor of capital controls.
So, does the new fascination with capital controls hold up to scrutiny?
We hope you're enjoying Project Syndicate.
To continue reading, subscribe now.
Get unlimited access to PS premium content, including in-depth commentaries, book reviews, exclusive interviews, On Point, the Big Picture, the PS Archive, and our annual year-ahead magazine.
Already have an account or want to create one? Log in