This paper synthesizes recent advances in the theoretical and empirical literature on capital controls. We start by observing that international capital flows have both benefits and costs, but some of these are not internalized by individual actors and thus constitute externalities. The...

This paper analyzes the role of real exchange rate (RER) policies in promoting economic development. Markets provide a suboptimal amount of investment in sectors characterized by learning spillovers. We show that a stable and competitive RER policy may correct for this externality and other...