IMF changes its tune on capital controls

15 April 2000

A new report from the IMF, Country Experiences with the Use and Liberalization of Capital Controls, reviews experience with the use of capital controls in 14 countries and provides detailed studies of the experience of the use of controls in Chile, India and Malaysia. The report concedes that comprehensive, forcefully implemented controls on capital inflows and outflows can be useful to insulate countries from financial crises, although potentially they can lose effectiveness over time as financial markets exploit loopholes. The report also acknowledges that “in the absence of adequate macroeconomic and financial policies, capital account liberalization may increase vulnerability to external and domestic shocks.”

The report is available on the IMF‘s website and will be published as an occasional paper.