Capital controls in India: Did they work?6 min read 21 Jan 2013, 04:38 PM IST
Capital controls introduced unintended microeconomic distortions in India
Among the questions that divide macroeconomists is whether capital controls are an effective tool for managing an economy. Can restrictions on foreign direct investment (FDI) help reduce inflation? Can restrictions on how much money can be taken out of the economy help protect against speculation? Several studies have found that temporary (or transitory) capital controls can be effective but they only appear to work for a short time. Often, people can find ways to get around the controls (Magud et al. 2011). In recent research we see what evidence the India experience has to offer to the global debate.
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