{"id":526377,"date":"2010-04-13T11:00:23","date_gmt":"2010-04-13T15:00:23","guid":{"rendered":"http:\/\/blogs.wsj.com\/economics\/2010\/04\/13\/capital-control-confusion-at-the-imf\/"},"modified":"2010-04-13T11:00:23","modified_gmt":"2010-04-13T15:00:23","slug":"capital-control-confusion-at-the-imf","status":"publish","type":"post","link":"https:\/\/mereja.media\/index\/526377","title":{"rendered":"Capital-Control Confusion at the IMF"},"content":{"rendered":"

In February, the International Monetary Fund<\/strong>, which had long opposed controls on capital inflows, published a surprising paper<\/a> that reversed course.<\/p>\n

For countries facing a big inflow of capital — with the attendant risks of asset bubbles — the use of capital controls \u0093is justified as part of the policy toolkit to manage inflows,\u0094 the IMF paper wrote. Even if investors figure out ways around the controls, the restrictions still can be useful, the IMF said because \u0093the cost of circumvention acts as \u0091sands in the wheels\u0092\u0094 and slows down investment.<\/p>\n

The change in advice won applause from IMF critics, especially on the left, who have long believed that the Fund was too wedded to free flow of capital even if unhindered flows could inflate asset bubbles.<\/p>\n

Today, the IMF came close to changing its mind again. \u0093Even if capital controls prove useful for individual countries in dealing with capital inflow surges,\u0094 the IMF wrote its semi-annual Global Financial Stability Report<\/a>, \u0093they may lead to adverse multilateral effects\u0085 A widespread reliance on capital controls may delay necessary macroeconomic adjustments in individual countries and, in the current environment, prevent the global rebalancing of demand and thus hinder the recovery of global growth.\u0094<\/p>\n

So, should a country use restrictions on capital — which can be in the form of a tax or increased reserve requirements — or not?<\/p>\n

The IMF isn\u0092t clear. It seems to back them as a short-term measure, but not a long-term one, but doesn\u0092t give specific advice how to tell one situation from another. Here\u0092s the IMF\u0092s best shot: \u0093Since the use of capital controls is advisable only to deal with temporary inflows\u0085 they can be useful even if their effectiveness diminishes over time,\u0094 the GFS report suggests. \u0093However the decision to implement capital controls should consider their distortionary effects\u0094 too.<\/p>\n

Effie Psalida<\/strong>, an IMF economist, says the two papers on capital control \u0093complement\u0094 each other.<\/p>\n

Maybe. Or maybe they confuse each other. For policy makers in developing countries: Good luck making the call.<\/p>\n

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In February, the International Monetary Fund, which had long opposed controls on capital inflows, published a surprising paper that reversed course. For countries facing a big inflow of capital — with the attendant risks of asset bubbles — the use of capital controls \u0093is justified as part of the policy toolkit to manage inflows,\u0094 the […]<\/p>\n","protected":false},"author":850,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[7],"tags":[],"class_list":["post-526377","post","type-post","status-publish","format-standard","hentry","category-news"],"_links":{"self":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/526377","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/users\/850"}],"replies":[{"embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/comments?post=526377"}],"version-history":[{"count":0,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/posts\/526377\/revisions"}],"wp:attachment":[{"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/media?parent=526377"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/categories?post=526377"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/mereja.media\/index\/wp-json\/wp\/v2\/tags?post=526377"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}