In the aftermath of the Asian crisis of the late 1990’s, the substantive argument did not undergo any change, but was only tempered to the extent that removal of capital controls has to keep pace with strengthening of domestic financial sector. Post the global financial crisis, capital controls have come to be seen as an active tool of macro-prudential policy albeit in difficult situations.
4. Why have any controls on capital account? The history of capital account openness has been chequered. It may be recalled that capital controls were a part of international milieu throughout the Bretton Woods era and it was only in the 1970’s that the advanced economies started dismantling them. This was followed by several emerging economies, particularly in Latin America and East Asia.