ABSTRACT
The controls over international capital movements that came into existence in the early seventies were mainly designed to limit short-term flows and to operate on inflows rather than outflows. The more freedom of man oeuvre is sought in monetary policy and the more fluctuations in exchange rates are limited, the greater is likely to be the need for controls over capital movements. Industry or at least manufacturing industry is not the major source of demand for capital and is unlikely to be the chief victim of any increase in foreign investment. If monetary integration is ever achieved in the European Economic Community there can be no place for capital controls within the Community. The system of economic management is unlikely to be simply a matter of political ideology and must reflect to some extent what has been found to work in practice. The unusual scale of short-term capital flows has reflected the influence of two major factors in the world economy.
