Controls of inflows

Gallagher and Stephany Griffith-Jones In the wake of the financial crisis, Western economists and policy-makers are to be applauded for recognizing that financial globalization has its limits and that capital controls may be necessary for emerging and developing nations to defend their economies from volatile capital flows. Most of the discussion to date has focused on controls on capital inflows, but could there be a role for controls on outflows as well?

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Firstly, the prudence motivation requirement says that such regulation should curb and manage the excessive risk accumulation process with cautious forethoughts for the purpose of preventing an emerging financial crisis and economic collapse. Secondly, the ex-ante timing means that such regulation should be taken effectively before the realization of any unfettered crisis as opposed to taking policy interventions after a severe crisis already hits the economy.

I. DEVELOPING COUNTRY REGIONS

Significant amounts of remittances were sent from 37 U.

FDI inflows mean the investment which a country receives from other countries, which in turn help the host country to have access to new technologies, capital and organizational technologies and management skills. FDI creates direct, stable and long-lasting links between economies.

It encourages the transfer of technology and know-how between countries.

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It provides a win-win situation to the host and the home countries. While it offers opportunities of employment and introduction of new skills, etc. In India, FDI is considered as a development tool, which can help in achieving self-reliance in all the sectors of the economy. Today, India receives large FDI inflows in line with its robust domestic economic performance.

Capital control - Wikipedia

The attractiveness of India can be ascertained from the increase in FDI inflows into India as depicts in Table 1 from to The complex legal and constitutional framework, restrictive and close door FDI policy were some of the major reasons behind this.

Such a restrictive policy did not provide an environment conducive to FDI in India. With the opening up of Indian economy inFDI policy as a part of broader process of economic reforms underwent a significant change.

Foreign investments were allowed in a phased manner in most of the sectors and restrictive conditions were waived or relaxed.

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These measures motivated the foreign investors from every corner of the world to India; and the country emerged as a strong economic player at that time. During and the FDI reveals the cyclic trend because of several factors.

These include the mild recession in US and global economy, financial crisis of South-East Asia, political instability and the poor domestic industrial environment. With the entry of Modi government inwhich took another phase of reforms in FDI policy revive the confidence of foreign investors again in India.Foreign Direct Investment (FDI) is a key element in international economic integration.

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FDI inflows mean the investment which a country receives from other countries, which in turn help the host country to have access to new technologies, capital and organizational technologies and management skills.

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List of Members. Program Working Papers, in chronological order. Gita Gopinath of Harvard University and Pierre-Olivier Gourinchas of University of California, Berkeley. This paper analyzes the effectiveness of controls on capital inflows.

In particular, we analyze in great detail the Chilean experience with the use of the unremunerated reserve requirement. By changing the composition of inflows, capital controls may help aim the evolution of financial markets at objectives that are consistent with broader development goals, and .