Capital Account Regulation and National Autonomy: The Political Economy of the New Welfare Economics Abstract
The 2007-2009 Global Financial Crisis (GFC) eroded the consensus around the benefits of capital mobility within mainstream economics. Against this background, this paper discusses to what extent the new mainstream position on capital flow management measures, based on the New Welfare Economics, expands the policy space of developing and emerging economies (DEEs). This paper argues that the new position can be classified as an embedded neoliberal one, given that it keeps liberalization as its ultimate goal, while nonetheless accepting to mitigate some of its harmful consequences. After comparing the capital account policies of China and Brazil, this paper concludes that the policy prescriptions of the New Welfare Economics do not lead to higher levels of national autonomy for DEEs and are likewise unable to curb financial instability in these countries.
Keywords capital mobility; capital controls; New Welfare Economics; Political Economy; embedded neoliberalism.
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Source: Created by the authors based on Fernandez et al (2016) Note: This reformulated version of the CCI took into consideration the average level of capital controls over four types of flows: direct investments, portfolio investments, other investments, and derivatives.
Source: Created by the authors based on 
Source: Adapted by the authors from 
Source: Adapted by the authors from 
Source: Adapted by the authors from 
Source: Created by the authors based on The World Bank (2020).