ABSTRACT
Capital controls ultimately depend on the government's ability to suppress demand for a broad range of investment alternatives. This chapter demonstrates that capital controls represent an attempt to destroy linkages between national and global systems and that those linkages are essential to the creation and maintenance of national prosperity. It describes the effects of capital controls on a nation's ability to achieve an efficient allocation of existing capital resources and to attract new capital investment. The chapter establishes the arguments with respect to a single policy objective—providing economic growth and prosperity. It also demonstrates that the attraction and allocation of capital are prime ingredients in the achievement of the policy goal. The chapter also describes the roles of capital markets and investor analysis in the attraction and allocation of capital and recognizes the importance of location and other factors. It reviews the basic elements of investment analysis that will determine the outcome of the selection decision.
