RESTRAINTS ON CAPITAL FLOWS: WHAT ARE THEY?

Though there has been much general debate recently about the pros and
cons of capital controls, there remains substantial confusion and uncertainty about what
exactly is entailed by the term restraining global capital flows. Popular discussion around
this has typically been long on rhetoric and loose generalisations and acutely short on
specifics. The aim of this paper is therefore to help refine the debate somewhat by clarifying
and systematically categorising the various concepts that have been discussed in policy
circles and the popular media. Two specific country experiences with restraining capital
flows, viz. Chile and Malaysia are highlighted and discussed, as are the recent and muchpublicised
proposals for exchange controls (a la Paul Krugman) and a global currency
transactions tax in the forms of a Tobin tax.