The economics profession has recently started to give increased recognition to the need for restraining capital movements and exercising greater care in opening up capital accounts in developing countries.1 This is a significant development, for, not long ago, unfettered flow of capital across countries was being hailed as a means for improving global efficiency and promoting world welfare. At its annual meetings in 1997, the IMF had pushed to incorporate capital account convertibility into its Articles of Agreement. However, the gravity of the East Asian crisis drove home the dangers inherent in premature deregulation of financial markets and freeing of capital movements, at least as far as developing countries are concerned.