Capital Controls: Investment Flows in Latin America

Capital control policies in emerging market (EM) economies have fluctuated for the past two decades as markets have responded to changing global dynamics. This continues to be the case in 2013.

The term capital controls refers to a wide array of tools policymakers use to limit the flow of capital in and out of their economies. They typically target short-term portfolio flows—such as the purchase of domestic bonds and stocks by foreigners—that can generate undesired currency volatility. Long-term flows such as foreign direct investment tend to be allowed to move more freely.

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