This paper aims to develop a deeper understanding of the role that capital controls may play in coping with volatile movements of capital, and of complex issues surrounding capital account liberalization. It provides a detailed analysis of specific country cases to shed light on the potential benefits or costs of capital controls, including those used in crisis situations. It also considers the important link between prudential policies and capital controls, including the improvement of prudential practices and accelerated financial sector reform to address the risks involved in cross-border transactions. Chapter II reviews the experience of selected countries with the use or removal of capital controls based on a detailed review and comparison of the experience of a group of 14 countries that used various types of capital controls, often to manage episodes of unsustainable capital flows. Chapter III examines the prudential approach to managing the risks associated with capital flows, and Chapter IV provides some conclusions.