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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. Donald J Mathieson & Liliana Rojas-Suárez, 1992. "Liberalization of the Capital Account; Experiences and Issues," IMF Working Papers 92/46, International Monetary Fund.
    2. 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.
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    Keywords

    Capital movements ; International finance;

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