exchange controls, are government-imposed barriers to foreign savers investing in
domestic assets (for example, government securities, stock, or bank deposits) or to
domestic savers investing in foreign assets. At one extreme, a government may seek
to gain control over its payments position by directly circumventing market forces
through the imposition of direct controls on international transactions. For example,
a government that has a virtual monopoly over foreign-exchange dealings may
require that all foreign-exchange earnings be turned over to authorized dealers. The
government then allocates foreign exchange among domestic traders and investors at
government-set prices.