Background Note | HBS Case Collection | April 2002 (Revised September 2002)

Capital Controls

by Rawi E. Abdelal and Laura Alfaro

Abstract

Only in the waning years of the 20th century did international financial markets begin to enjoy the freedom from government regulation that they had experienced before the first world war. By 2002, international capital markets had grown to be enormous--$1.2 trillion flowed around the globe per day. The massive size of the market presented policy makers with a serious challenge as they were forced to grapple with the costs and benefits of such mobile capital. This note briefly relates the modern history of capital controls and summarizes scholarship on the advantages and disadvantages of international financial market regulation.

Keywords: History; Policy; Business and Government Relations; Change Management; Cost vs Benefits; Governance Controls; Governance Compliance; Emerging Markets; Financial Markets; Network Effects; Banking Industry; Financial Services Industry;

Citation:

Abdelal, Rawi E., and Laura Alfaro. "Capital Controls." Harvard Business School Background Note 702-082, April 2002. (Revised September 2002.)