Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/90674
Authors: 
Schuknecht, Ludger
Year of Publication: 
1998
Series/Report no.: 
WTO Staff Working Paper ERAD-98-11
Abstract: 
This note discusses capital controls using insights from the trade policy literature. It highlights some key issues that have been neglected in the current international debate on capital controls. Capital is tradable in the same way as many goods and services are. As a result, much of the analysis pertaining to trade and trade policy in goods and services applies with equal force to capital movements. Free trade is typically the best trade policy, no matter whether it is trade in goods, services or capital. But if investor behaviour and the prevailing policy environment are not conducive to immediate free trade, the choice of instrument for controlling capital flows becomes important. Tariffs and other price-related restrictions are preferable to quantitative restrictions or prohibitions because: (i) they cause less rent seeking, and (ii) they do not insulate the domestic market from price changes and innovations in international markets.
Subjects: 
Trade policy
capital controls
protectionism
JEL: 
F13
F21
Document Type: 
Working Paper

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