TY  - JOUR
AU  - Forbes,Kristin J.
TI  - Capital Controls: Mud in the Wheels of Market Discipline
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 10284
PY  - 2004
Y2  - February 2004
UR  - http://www.nber.org/papers/w10284
L1  - http://www.nber.org/papers/w10284.pdf
N1  - Author contact info:
Kristin Forbes
MIT Sloan School of Management
100 Main Street, E62-416
Cambridge, MA  02142
Tel: 617/253-8996
Fax: 617/258-6855
E-Mail: kjforbes@mit.edu
AB  - Widespread support for capital account liberalization in emerging markets has recently shifted to skepticism and even support for capital controls in certain circumstances. This sea-change in attitudes has been bolstered by the inconclusive macroeconomic evidence on the benefits of capital account liberalization. There are several compelling reasons why it is difficult to measure the aggregate impact of capital controls in very different countries. Instead, a new and more promising approach is more detailed microeconomic studies of how capital controls have generated specific distortions in individual countries. Several recent papers have used this approach and examined very different aspects of capital controls   from their impact on crony capitalism in Malaysia and on financing constraints in Chile, to their impact on US multinational behavior and the efficiency of stock market pricing. Each of these diverse studies finds a consistent result: capital controls have significant economic costs and lead to a misallocation of resources. This new microeconomic evidence suggests that capital controls are not just  sand', but rather  mud in the wheels' of market discipline.
ER  -