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On Triple Crisis, Ilene Grabel was the first to highlight the IMF’s change in position on capital controls. In this new video for the Guardian and in a related article for Foreign Policy magazine, Triple Crisis blogger Kevin Gallagher also notes the IMF’s acceptance of capital controls and argues that the US should follow suit and stop outlawing the use of controls through its trade and investment agreements.

Read “Control That Capital”, from Foreign Policy, along with more of Gallagher’s research on foreign investment for development.

3 Responses to “Why the IMF Changed its Mind about Capital Controls”

  1. Jane Ginn says:

    Thanks for the update Kevin. What are the implications of this new IMF Report relative to the ongoing debate about whether the U.S. should continue to push for China to revalue the renminbi?

  2. Don Maroc says:

    Well, it’s about time that a little light is showing through that dark curtain. Following Bill Clinton’s admission of failure in forcing open the Haitian markets, especially agricultural, makes it time for the IMF and the US to take an honest look at “structural adjustments forced on those who must borrow money.

    Don Maroc

  3. Ilene Grabel says:

    Regarding Jane’s query, the IMF report does refer to the Chinese currency (without naming the country). Quoting from the report (p. 5, emphasis added):
    “A key conclusion is that, if the economy is operating near
    potential, if the level of reserves is adequate, if the exchange
    rate is not undervalued, and if the flows are likely
    to be transitory, then use of capital controls—in addition to both
    prudential and macroeconomic policy—is justified as part of the
    policy toolkit to manage inflows.”
    Thus, in the view of the authors of this study the controls on capital flows in China are not justified, given the undervaluation of the country’s currency.

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