How Capital Controls Work and Sometimes Don’t
by Tracey Samuelson
It’s difficult to say how effective capital controls are, often because it’s hard to separate the impact of the controls from the circumstance that precipitated them, said Michael Klein, a professor at the Fletcher School at Tufts University.
In general, Klein said, long-term controls tend to work better than short-term, reactionary ones, which people often find ways to get around.
A notable exception might be restrictions Iceland put in place in 2008 after its banking system collapsed.
“What the country did was put in very wide ranges of controls over virtually all assets,” said Klein. “Iceland was able to recover more quickly, I think, than it would have, had the money actually left the country.”