International trade and investment treaties and limits on capital control

Abstract

Capital controls are once again on the policy agenda and even multilateral credit institutions recognize their usefulness. Controls can not always be freely implemented. The institutional structure associated with Free Trade Agreements and Bilateral Investment Agreements can severely limit the possibility of regulating the capital account and the financial system. After reviewing the literature on the liberalization of the capital account, capital controls, the administration of the exchange rate and macro-prudential policies, this paper discusses the limitations associated with these agreements.