Description

The purpose of this paper is to examine the emerging and transition economies’ experience with capital account convertibility, capital account management and capital controls. Overall, the analysis suggests that policies aiming at controlling capital flows have been less effective—in terms of helping achieve their objectives—than claimed by their supporters. An econometric analysis also suggests that restricting capital mobility does not reduce the probability of experiencing a current account reversal. On the other hand, the degree of financial openness does not appear to be related to the intensity with which reversals affect real economic performance.