While the debate on the merits of capital account liberalisation is not new, it has
intensified in the aftermath of the emerging market crises of the 1990s. The
Mexican crisis, and the Asian crisis in particular, showed that even countries with
high growth rates and sound macroeconomic policies could be severely affected by
a rapid reversal of capital flows. These events have prompted proposals that range
from ‘throwing sand in the wheels’ of capital movements to the complete
prohibition of international financial transactions. Sceptics of measures aimed at
limiting capital mobility, on the other hand, argue that these would result in lost
investment and economic growth.