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Capital Controls: World Experience and Lessons for Russia

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  • Bozhechkova, Alexandra, Goryunov, Evgeny, Sinelnikov-Murylev, Sergey, Trunin, Pavel V.

    (Russian Presidential Academy of National Economy and Public Administration, Gaidar Institute for Economic Policy, Russian Foreign Trade Academy)

Abstract

The article investigates causes and consequences of the introduction of capital controls. The evolution of the views of international organizations on capital mobility restrictions including the revision of liberal views of economic community after the global financial crisis of 2008-2009, when it became clear that high capital mobility is one of the sources of imbalances in the financial sector, is examined. The main theoretical concepts, which take into account the advantages of openness and related macroeconomic risks, are presented, as well as the economic consequences of inflow and outflow of various types of capital flows, including foreign direct investment, portfolio investment, loans, etc., are analyzed. The evolution of capital controls in Russia, considered simultaneously with the dynamics of inflow and outflow of capital from the Russia, shows that the key factors in the movement of capital are the state of the Russian economy, as well as internal and external shocks, while the practice of using restrictions on the financial account has proved to be poorly effective. According to the analysis of theoretical concepts and international experience of functioning of economies in the face of restrictions on cross-border capital operations by the example of Brazil, Malaysia, Chile, India, China and other countries, as well as the study of the Russian practice in regulation of capital transactions, the authors conclude that capital controls can only be imposed in exceptional cases when it is necessary to mitigate the negative effects of shocks associated with changes in conditions of global financial markets. In this case, the advantage should always be given to macroprudential measures.

Suggested Citation

  • Bozhechkova, Alexandra, Goryunov, Evgeny, Sinelnikov-Murylev, Sergey, Trunin, Pavel V., 2017. "Capital Controls: World Experience and Lessons for Russia," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 2, pages 8-43, April.
  • Handle: RePEc:rnp:ecopol:ep1711
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    More about this item

    Keywords

    capital control; capital mobility; financial account; macroeconomic stability; investments; financial crises;

    JEL classification:

    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F38 - International Economics - - International Finance - - - International Financial Policy: Financial Transactions Tax; Capital Controls

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