A simple trade policy perspective on capital controls

Ludger Schuknecht

No ERAD-98-11, WTO Staff Working Papers from World Trade Organization (WTO), Economic Research and Statistics Division

Abstract: This note discusses capital controls using insights from the trade policy literature. It highlights some key issues that have been neglected in the current international debate on capital controls. Capital is tradable in the same way as many goods and services are. As a result, much of the analysis pertaining to trade and trade policy in goods and services applies with equal force to capital movements. Free trade is typically the best trade policy, no matter whether it is trade in goods, services or capital. But if investor behaviour and the prevailing policy environment are not conducive to immediate free trade, the choice of instrument for controlling capital flows becomes important. Tariffs and other price-related restrictions are preferable to quantitative restrictions or prohibitions because: (i) they cause less rent seeking, and (ii) they do not insulate the domestic market from price changes and innovations in international markets.

Keywords: Trade policy; capital controls; protectionism (search for similar items in EconPapers)
JEL-codes: F13 F21 (search for similar items in EconPapers)
Date: 1998
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Working Paper: A Simple Trade Policy Perspective on Capital Controls (1998)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:wtowps:erad9811

DOI: 10.30875/230bd8d4-en

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