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International capital transactions: should they be restricted?

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  • Norman S. Fieleke

Abstract

Many countries have shifted toward freer markets in recent years. This shift is far from complete or free from backsliding, however. Moreover, a number of prominent economists contend that government restrictions should be maintained, or at least kept in reserve, for certain categories of transactions, such as international capital movements. In particular, it is sometimes argued that capital controls should be used to buttress the Exchange Rate Mechanism of the European Monetary System, which has been undermined by speculative attacks. ; Following a capsule summary of the recent use of international capital restrictions, this article discusses their international acceptance, their theoretical justification, and their efficacy in attaining overall balance-of-payments or exchange rate goals. The author concludes that governments have had no more than fleeting and minor success in their use of capital controls in recent years.

Suggested Citation

  • Norman S. Fieleke, 1994. "International capital transactions: should they be restricted?," New England Economic Review, Federal Reserve Bank of Boston, issue Mar, pages 27-39.
    • Handle: RePEc:fip:fedbne:y:1994:i:mar:p:27-39
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    File URL: http://www.bostonfed.org/economic/neer/neer1994/neer294c.pdf
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    References listed on IDEAS

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    1. Browne, Francis X. & McNelis, Paul D., 1990. "Exchange controls and interest rate determination with traded and non-traded assets: the Irish-United Kingdom experience," Journal of International Money and Finance, Elsevier, vol. 9(1), pages 41-59, March.
    2. Mr. Donald J Mathieson & Ms. Liliana Rojas-Suárez, 1992. "Liberalization of the Capital Account: Experiences and Issues," IMF Working Papers 1992/046, International Monetary Fund.
    3. Mr. Gonzalo C Pastor Campos & Mr. Thierry Pujol & Mr. Michel Galy, 1993. "Spain: Converging with the European Community," IMF Occasional Papers 1993/001, International Monetary Fund.
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    Cited by:

    1. Jean-Pierre Allegret, 2000. "Quel role pour les controles des mouvements internationaux de capitaux ?," Economie Internationale, CEPII research center, issue 81, pages 77-108.
    2. Barry Eichengreen & Andrew K. Rose & Charles Wyplosz, 1996. "Is There a Safe Passage to EMU? Evidence on Capital Controls and a Proposal," NBER Chapters, in: The Microstructure of Foreign Exchange Markets, pages 303-332, National Bureau of Economic Research, Inc.
    3. Jacques Miniane & John H. Rogers, 2007. "Capital Controls and the International Transmission of U.S. Money Shocks," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 39(5), pages 1003-1035, August.
    4. Eichengreen, Barry & Tobin, James & Wyplosz, Charles, 1995. "Two Cases for Sand in the Wheels of International Finance," Economic Journal, Royal Economic Society, vol. 105(428), pages 162-172, January.
    5. Eichengreen, Barry & Wyplosz, Charles, 1995. "What Do Currency Crises Tell Us About the Future of the International Monetary System?," Center for International and Development Economics Research (CIDER) Working Papers 233418, University of California-Berkeley, Department of Economics.
    6. Jacques Miniane, 2004. "A New Set of Measures on Capital Account Restrictions," IMF Staff Papers, Palgrave Macmillan, vol. 51(2), pages 1-4.

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    Keywords

    Capital movements; International finance;

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