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Unpublished Paper
The IMF’s Reassessment of Capital Controls after the 2008 Financial Crisis: Heresy or Orthodoxy?
ExpressO (2014)
  • Philip J. MacFarlane
Abstract

While the IMF allows countries to limit the flow of capital through the use of capital controls, it has since the 1980s discouraged this practice and instead promoted capital account liberalization as a means for developing countries to attract the foreign investment needed for economic growth. The 2008 financial crisis, however, prompted the IMF to reconsider this view and increasingly support the use of capital controls for countries that were vulnerable to the effects of volatile capital flows. In 2012, the IMF changed its official position on the use of capital controls from permitted but discouraged to accepted in certain circumstances. This paper discusses the IMF’s recent reconsideration of the use of capital controls. The paper discusses some of the different types of capital flows and capital controls, provides a brief history of the IMF’s position regarding capital controls, including the relevant rules in the IMF Agreement, discusses the era of financial globalization and the evolution of the IMF’s current position on capital controls, and surveys the current research on capital controls.

Keywords
  • IMF,
  • capital controls,
  • financial crises
Publication Date
September 10, 2014
Citation Information
Philip J. MacFarlane. "The IMF’s Reassessment of Capital Controls after the 2008 Financial Crisis: Heresy or Orthodoxy?" ExpressO (2014)
Available at: http://works.bepress.com/philip_macfarlane/1/