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Stemming the Tide: Capital Account Regulations in Developing and Emerging Countries

Annina Kaltenbrunner

Abstract This chapter examines the evolution of capital controls in developing and emerging countries (DECs). It provides a summary of the definition of capital controls, their rationale in different economic paradigms, and historical evolution. It then analyses the most recent controls implemented in the wake and aftermath of the global financial crisis in 2008. It argues that rather than fundamentally questioning the benefits of open capital accounts, these measures were imposed as a last resort given the inherent contradictions of the conventional macroeconomic configuration. Controls have remained market-based, temporary and frequently disguised as macroprudential regulations to deal with the worst implications of free capital account convertibility. As such, they have sought to safeguard the general openness to cross-border capital. The chapter also argues that given the inherent instability of international financial markets and the structural subordination DECs assume in them, capital controls need to be permanent, comprehensive and institutionalised development instruments.

A. Kaltenbrunner (h)

Leeds University Business School, Maurice Keyworth Building, University of Leeds, Leeds LS2 9JT, UK

© The Author(s) 2016

P. Arestis, M. Sawyer (eds.), Financial Liberalisation, DOI 10.1007/978-3-319-41219-1_7

Keywords Developing and emerging countries • Capital controls • Macroeconomic policy • Development policy

JEL Classifications F31 • F32 • O11

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