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Capital Control Reconsidered: Financialisation and Economic Policy

Siddiqui, Kalim and Armstrong, Phil (2017) Capital Control Reconsidered: Financialisation and Economic Policy. International Review of Applied Economics. ISSN 0269-2171

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We consider capital controls and their impact on selected countries, providing a critique of IMF policy. We show how the warning signs of the 1970s were ignored and the consequences became apparent during the ensuing period of neoliberal hegemony. We contend that promoting increased capital mobility is counterproductive as it reduces macroeconomic ‘policy space’. We introduce a development of the international policy ‘trilemma’ in the form of a variant of the idea of the ‘quadrilemma’. We suggest that, in most cases, the key policy driving economic growth is fiscal policy but it may be that its unconstrained use (and that of monetary policy) is not possible either under fixed exchange rates or when free capital mobility exists; a nation may face a ‘demi-quadrilemma’. We contend that, in practice, a country can only adopt ‘two from four’; if it chooses to retain free use of monetary and fiscal policy, it must sacrifice both fixed exchange rates and capital mobility. We advocate the rejection of fixed exchange rates and free capital mobility allowing the retention of requisite monetary and fiscal policy space, and that a multinational approach to the capital control policy would effectively contribute to a growth and development strategy.

Item Type: Article
Uncontrolled Keywords: Capital controls; Capital liberalisation; Instability; Financialisation; demi-quadrilemma
Subjects: H Social Sciences > HG Finance
Schools: Huddersfield Business School
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Depositing User: Jonathan Cook
Date Deposited: 29 Sep 2017 11:11
Last Modified: 28 Aug 2021 15:32


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