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A website forum in which senior fellows of the Peterson Institute for International Economics discuss and debate their responses to global economic and financial developments as they occur each day and offer insights that others might overlook.
If nothing else, the financial crisis of 2007–10 has reinforced the general proposition that unbridled capital flows can pose a potential problem for the global financial system. The seriousness of that problem depends on economic and financial circumstances, including the strength and quality of macroeconomic and prudential institutions [...]
On February 19, 2010, the International Monetary Fund released a “Staff Position Note” on capital controls as a policy instrument.1 The paper concluded that, subject to four conditions, controls on capital inflows can be justified. The four conditions are: the economy is operating near potential, there is an adequate level of reserves, the exchange rate [...]
Paul Krugman, in a column last month for the New York Times, endorsed a tax on financial transactions, proposed recently by Adair Turner, Britain’s top financial regulator. It is important to distinguish this Turner proposal from the original Tobin tax on international flows and these two taxes in turn [...]