We began to hear much more discussion about “capital account” crises, and the proposed responses became much more nuanced. Hitherto seldomdisputed notions about the optimality of rapid opening up to international capital flows became more widely questioned. Capital controls – anathema in the world of the early 1990s – became respectable under certain circumstances.
Let me be clear that I am not talking about Australia here; rather, I have in mind countries where public debt could approach 100 per cent of annual GDP over the next few years. It is not that these magnitudes are completely unmanageable, but they will constrain choices to an extent these countries have not been accustomed to for a long time.