Capital Controls?

Capital Controls (i.e. government regulation on financial flows in and out of the country) are a complex topic that I've been meaning to learn more about for a while (and will suspend judgment on for now). I haven't had the chance to do that yet (and probably won't for a while) but I did see the following in Paul Krugman's column on Malaysia's response to the Asian financial crisis:

The scope of global "contagion"--the rapid spread of the crisis to countries with no real economic links to the original victim--convinced me that IMF critics such as Jeffrey Sachs were right in insisting that this was less a matter of economic fundamentals than it was a case of self-fulfilling prophecy, of market panic that, by causing a collapse of the real economy, ends up validating itself. But I also concluded that the threat of further capital flight would prevent Asian economies from simply reflating, that is, increasing public spending and cutting interest rates to get their economies growing again. And so I found myself advocating temporary restrictions on the ability of investors to pull money out of crisis economies--a curfew, if you like, on capital flight--as part of a recovery strategy.

Krugman (in 1999 at least) seems like a cautious supporter of Capital Controls:

Until the Malaysian experiment, the prevailing view among pundits was that even if financial crises were driven by self-justifying panic, there was nothing governments could do to curb that panic except to reschedule bank debts--part, but only part, of the pool of potential flight capital--and otherwise try to restore confidence by making a conspicuous display of virtue. Austerity and reform were the watchwords. The alternative--preventing capital flight directly, and thereby gaining a breathing space--was supposed to be completely impossible, with any attempt a sure recipe for disaster. Now we know better. Capital controls are not necessarily the answer for every country that experiences a financial crisis; sometimes confidence can be restored without the need for coercive measures, and even when calming words fail, "burden sharing" by banks and other lenders will often be enough. But it would now be foolish to rule out controls as a measure of last resort.

Dani Rodrik seems to be a more vocal supporter, as witnessed by this piece in the FT and his post on Nonsensical Arguments Against Capital Controls. Finally, for those who want to learn more is an empirical study on the Malaysian situation by Rodrik and Kaplan showing that Capital Controls were indeed effective there.