Article: Capital Controls and Emerging Markets

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Summary of Articles

Prepared for:

Professor Khaled El-Mattrawy

Eco 231

Prepared by:

Jeannette Vega

Group #7

Spring 2005

Article: Capital Controls and Emerging Markets

Author: Ramon Moreno

In this article the author examines the costs and benefits of liberalizing capital controls in countries with emerging markets. In order to better understand this article, the following working definitions are offered:

* Capital Accounts are the net result of public and private international investment and lending activities.

* Capital Controls are rules and restrictions that are imposed by countries in an effort to control foreign exchange transactions and to manage capital flows.

* Capital Flow refers to the movement of international capital.

* Emerging Markets are those markets (stock and bond) in economically developing countries. Emerging markets are also referred to as emerging economies and are extremely volatile because of the instability usually associated with developing countries yet offer the potential to share in the early stages of a country's economic growth.

Why lift capital controls?

The author states that economies of the wealthier and developed countries employ open capital accounts, which means that