Should Capital Controls be Banished?

Richard N. Cooper

RNC

Richard N. Cooper

AT ITS SEMIANNUAL MEETING in April 1997 the Interim Committee of the
International Monetary Fund (IMF) proposed that the organization’s Articles
of Agreement (the basic “constitution” of international financial relations
among its 182 member countries) be amended to include currency
convertibility for capital transactions among its fundamental objectives.
Since the IMF was founded in 1946, currency convertibility for current
transactions—goods, services, travel, interest, and dividend payments—
enshrined in Article VIII, has been not only a fundamental objective of
the organization but a condition for membership in good standing. But
convertibility for capital transactions was pointedly excluded from the
basic objectives; indeed, early proposals would have enjoined member
countries, when requested, to help other members enforce such controls on
international capital transactions as they might impose, although that provision
was ultimately not adopted.