Capital Control as a Safeguard in the Capital Account Crisis

Chon Pyo Lee

Professor, School of Economics, Seoul National University, Seoul 151-742, Korea, Tel: +82-2-880-6391 chonpyo@snu.ac.kr

JEL Classification: F3, G1, O1

Abstract

Many emerging market economies suffered from financial crisis mainly caused by capital account imbalances. Main recommendations for preventing crises were to keep the house clean, maintain transparency and good governance, and sound management of macroeconomic policies. It is observed that in the area of finance there is no safeguard measure, whereas in the area of trade there are a few; while the current account imbalances have less severe effects than the capital account imbalances. Thereupon, it is suggested that at least a safeguard measure can be introduced in the area of finance, and capital control is suggested as an emergency safeguard.

Keywords:

Capital control, Capital account crisis, Safeguard, Current account crisis, Tobin tax

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