Category:Capital Controls

From Eurêka

Capital Controls

Capital controls Barriers to the free movement of capital across national borders and between foreign exchanges. Examples include outright prohibitions on certain types of foreign investment, quantitative restrictions on foreign ownership of domestic firms, limits or prohibitions on holdings by firms or individuals of foreign exchange-denominated assets, and requirements that capital entering the country must remain for a specified time. Capital controls may cover investment by foreigners in local assets, and by locals in foreign assets in another country. The investment may be in local real and/or financial assets (“real” assets include land, buildings, enterprises and equipment; “financial” assets include cash, shares and government and company debt).

Capital account liberalization Process of reducing or removing capital controls on inward investment by foreign investors, and on outward investment by domestic residents. Usually undertaken to increase domestic access to sources of international capital (inward flows) and the transfer by foreign investors of profits, payments and remittances to other countries (outward flows). Sustainable capital account liberalization requires careful sequencing in line with measures to raise macro-economic stability, ensure open and transparent policy-making and strengthen prudential regulation and financial supervision.

French decontrol Turning point was France's decision in the early 1980s to relax controls having concluded that controls were so widely evaded by the wealthy that they were impractical. Once France changed, Europe moved to liberalize capital flows. Many other countries gradually joined for fear of losing in the worldwide chase for investment funds.