ABSTRACT
The global financial crisis of 2008 first came into existence in acute form in the US, and then spread to some European countries through the linkages of financial markets. The way the crisis spread to the real sectors of the concerned countries cannot be easily explained by the dominant economic paradigm of the day, and as a result, it has affected the thinking process of the policy makers all over the world. Many long-held views about the global financial system are being questioned, and some major changes in the financial regulations both at the global and individual countries’ levels are expected. The complete relaxation of rules and regulations in the 1990s and the first decade of 2000 is now over, and protectionism is already on the rise, and it is expected that world is to see some degree of control on the inter-country capital movement. Believers of some degree of capital control in the emerging countries — including scholars like Bhagawati (1998), Krugman (1995), Rodrik (2006), and Stiglitz (2002), — have argued that these restrictions keep speculative capital out and thus the system protects countries from volatility of international financial markets.
