Advanced economies have open capital accounts but there remains a wide variety in the capital account policies of emerging market and developing economies. Most emerging economies have adopted a regime of free capital account mobility, but some countries, such as Brazil have recently experimented with taxes on capital inflows. Other countries that are important players in the global economy, such as China, have traditionally controlled their capital flows very tightly and continue to do so. This raises several questions. First, why do countries have so different ways of managing their capital accounts? Second, do the international spillovers associated with capital account policies warrant more international oversight or coordination than is now the case? It may seem surprising that unlike for international trade in goods, where the World Trade Organization offers a strong set of rules, there are no international rules for capital account policies. 1 The rationale for government management of capital flows, and whether there is a need for international “rules of the game ” for those policies, have been identified as important questions for the G20 discussions after the crisis, and the staff of the IMF has produced several analytical papers on those issues (IMF (2011), Ostry et al. (2011)). The theoretical literature had little to say about those issues until recently. A few recent papers, however, have started to provide a more rigorous welfare-based analysis of the gains and costs of capital ac
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