This amounts to a tax on capital inflows, and the effective tax rate becomes very high if the money remains in the country only briefly.

ECONOMIST: Can capital controls stop poor countries crashing?

Thailand, for example, imposed a tax on foreign capital inflows into its stockmarket in 2006 but saw the market plunge and quickly reversed the decision.

ECONOMIST: Charting a different course | The

The slide has unnerved policymakers in economies whose currencies are rising (see article), notably Brazil, where a 2% tax on foreign capital inflows has been imposed.

ECONOMIST: Why it��s unlikely to turn into a dangerous collapse

In 1991 Chile imposed an implicit tax on inflows of short-term capital to reduce the aggregate inflow.

ECONOMIST: Hot and cold running money | The

One popular approach has been to impose controls on capital inflows by, say, introducing a tax on foreigners purchasing equities.

ECONOMIST: Exchange rates