Capital inflow restrictions
A)receive less support from economists than full capital controls.
B)may lessen domestic lending booms and risk-taking by domestic banks.
C)were imposed in the United States during the late 1990s.
D)were imposed in Europe in May 2000.

Question

Quizplus · Accepted Answer

Capital inflow restrictions are often used as a policy tool to reduce the risk of financial instability caused by large capital inflows. While full capital controls (restricting both inflows and outflows) are controversial and receive little support from economists, capital inflow restrictions have been shown to have some effectiveness in reducing domestic lending booms and risk-taking by domestic banks. The United States did not impose capital inflow restrictions in the late 1990s, and while some European countries have imposed such restrictions, there was no coordinated imposition of such measures in May 2000.

Capital Inflow Restrictions