Secondly, capital restrictions are very expensive to implement in most cases. To be effective, they must be applied quite broadly and may therefore also hinder desirable capital movements. What is more, they may also delay the necessary development of an efficient financial sector. However, this does not completely rule out the possibility of considering temporary restrictions in exceptional cases.
Limited controls on capital inflows can help to prevent crises by confining potential withdrawals. Such controls, however, can only be efficient if they are clearly understood as an interim measure, and if they are complemented by sound policies and well-designed prudential regulations.