This post by Gerard Lyons of Standard Chartered Bank is the third of three that beyondbrics is posting on Wednesday on capital controls. All are available here. Join the debate by posting your comments.

Brazil has twice raised the tax on bond inflows in recent weeks. Thailand has tightened its own controls. Other emerging markets may follow with similar actions. And who can blame them?

Following the successful co-ordination of global policy last year at the G20 London Summit, we are now back to countries setting policies to suit domestic needs. The trouble is that economic conditions around the world are so extreme that policies pursued in one country can have damaging repercussions elsewhere. So it is with monetary policy in the US and the west, with low interest rates leading to inflows into emerging economies. Hence the justification for exchange controls. Continue reading »

This post by Guillermo Calvo of Columbia University is the second of three that beyondbrics is publishing on Wednesday on capital controls. All will be available here. Join the debate by posting your comments.

The resilience of capital flows towards emerging market economies is a sign that the world economy may be moving towards resolving global imbalances and allocating capital more effectively.

However, many EM policymakers fear that it could be “too much of a good thing.” Portfolio flows could turn out to be highly speculative and exit en masse, as they have done during several EM financial crises in the last two decades. Continue reading »