Discuss the problems associated with the imposition of capital controls

What will be an ideal response?

First, with capital controls, domestic firms and investors must receive permission from the government to exchange domestic currency for foreign currency, leading to possible corruption. Second, multinational firms may be reluctant to invest in countries with capital controls because the firms will have difficulty returning any profits they earn to their home countries if they can't exchange domestic currency for foreign currency. Finally, in practice, many countries find that their capital controls are evaded by individuals and firms who resort to a black market where currency traders are willing to illegally exchange domestic currency for foreign currency.