Capital Controls or Protectionism
In its recent World Economic Outlook, the IMF recommends monetary tightening in emerging markets and continued monetary accommodation in the advanced economies. Alas, both pieces of advice could breed protectionism if not accompanied by effective capital controls.
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GENEVA – Economic growth in emerging markets is more than twice that in “advanced economies” (7.3% versus 3% in 2010, according to estimates by the International Monetary Fund). Not surprisingly, they are attracting capital inflows and featuring higher inflation rates (6.2% versus 1.6%). This is the case in much of Latin America.