A framework for managing excessive short term international capital inflows

Comments on Mathew Joseph “Capital controls: The way forward for India”, 21/05/2010, http://www.eastasiaforum.org/2010/05/21/capital-controls-the-way-forward-for-india/
I have not read the IMF report and don't have first hand information. According to what Joseph says, it shows that the IMF is yet again showing its incompetence in terms of managing or advising international economic matters especially on emerging economies.

As to options for macro management of capital inflows, I think it is important to distinguish shorter and longer terms objectives. They have quite different implications.

I believe that a better alternative or option is to levy refundable tax on capital inflows if it becomes necessary. Such a refundable levy works in the following way:

the levy is temporary in nature with a duration for managing capital inflow stability

it is set at an appropriate levy

it will be refunded after a specified period if the capital has always stayed in the country, otherwise it will not be refunded

it should attract a return at or slightly below the government bond rate of the same duration

in this way, so serious long term capital inflow is not unduely punished with little costs, but short term hot money or capital can be prevented or limited through the increased costs

It is better to have an international framework, agreement or principle to govern such regulations or management of international capital flows by individual national governments.