In the article An Introduction to Capital Controls

In the article An Introduction to Capital Controls -...

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Mike Liao Jr. 83381880 In the article An Introduction to Capital Controls, Christopher Neely defines a capital control as any policy that is designed to limit or redirect capital account transactions. These controls could take the form of taxes or quantity controls. According to Neely (1999), capital controls stem from World War I. Countries that went to war had to raise taxes to finance their expenditures and one important tool that they used was to impose restrictions that would reduce the outflow of capital so as to generate enough domestic taxes. Neely argues that capital controls- just like tariffs on goods- are detrimental to economic efficiency in that they distort resources from being used where they are most needed and that it was such distortions and the costs associated with them that many developed countries gradually removed them over the last 30 years. A major importance of a capital control is its ability to preserve monetary policy autonomy so as to direct monetary
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