The emerging global consensus is that capital controls can be used under some circumstances to mitigate the buildup of financial vulnerabilities. But they should not be used to compensate for inconsistent or inappropriate macroeconomic policies. Their effectiveness varies and typically diminishes over time.
For example, research at the Bank of Canada has found that capital control actions have only a limited impact on net capital inflows, monetary policy autonomy or the exchange rate.18 Finally, if controls are used to shore up an unsustainable exchange rate peg, they may exacerbate rather than stem volatility.