Capital Control

The weight of articles today remain opposed to the use of capital controls both in the long-term as well as the short-term despite the fact that more countries are now considering this type of economic policy. However, the recent imposition of capital controls in Malaysia, and the arguable success of such controls, has now led a few economists to come out in favour of this once universally discredited policy. Nevertheless, even those who view capital controls as having some value, caution against their prolonged and expansive use. The answer to whether or not capital controls are appropriate tools for protecting and facilitating the recovery of economies during crisis can only be answered when the extent and nature of such controls are determined with specificity along with the subject country’s economic position. Identical capital controls are not likely to be appropriate for two separate countries in two separate stages of economic development. Therefore, before a determination can be made as to whether or not capital controls are appropriate in a given situation, many factors must be considered concerning both the country and measures being proposed. The economy has now developed to a point that makes such extensive bureaucratic intervention, which necessarily accompanies capital controls, a greater burden than the minimal short-term good that accompanies it. Nevertheless, capital controls have not always been viewed as such opponents to a healthy economy.

By restricting the capital outflows by limiting their respective citizens as to their ability to invest outside their home country, the countries utilizing capital controls increased investments at home.