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2 results

  • 2 - Capital Flow Management Measures

  • from Part I - Key Concepts: Capital Flows and Controls
  • Bryan Mercurio, The Chinese University of Hong Kong
  • Book:
    Capital Controls and International Economic Law
    Published online:
    18 May 2023
    Print publication:
    01 June 2023, pp 25-44

  • Summary

    With cracks in the liberalisation approach to capital flows appearing during the Asian Financial Crisis and subsequent crises in the early 2000s, policymakers and commentators began to understand that unregulated finance and cross-border flows could generate extreme financial instability. Capital controls have become widespread. For some, the controls are limited in nature and duration, but for others the controls are widespread and remain in place for an extended period. This shift has occurred at the same time the IMF has been more accepting of CFMs and in particular shifted its position on the extent to which they can be a source of instability in emerging markets. This chapter focuses on the role and legitimacy of CFMs. The chapter first provides a definition of CFMs and explains their role and impact in terms of capital flow management. Next, the chapter explains why CFMs are so controversial and elaborates on their operational aspects and overall desirability. The chapter concludes with a discussion on why CFMs remain difficult to manage from a macro level in the absence of a global regulatory framework.

Capital Controls and International Economic Law
  • Bryan Mercurio
  • Published online:
    18 May 2023
    Print publication:
    01 June 2023
  • Focusing on capital controls, this study provides rigorous legal analysis to establish whether the mandate of the International Monetary Fund (IMF) extends to the capital account; that is, whether the IMF has the authority to control and/or regulate the use of capital controls by its member states. The book then analyses whether a country's use of capital controls is consistent with the obligations and commitments undertaken in various multilateral and bilateral trade and investment agreements. Finally, it analyses the tension within international economic law, as the IMF now encourages the use of capital controls under certain circumstances, while most trade/investment agreements prohibit or limit their use. Proposing a way forward to alleviate the tension and construct a more harmonious relationship between the norms and standards of finance, trade and investment, this study will be essential reading for policymakers.