Beyond purely macroeconomic policies, policy makers have at their disposal a number of tools to help mitigate financial-stability risks associated with capital inflows. It is convenient to group these according to whether they discriminate in terms of the residency of the parties to the capital transaction (capital controls), the denomination of the currency of the transaction (FX-related prudential measures), or neither (other prudential measures). By definition, prudential measures apply only to the regulated domestic financial system (notably banks, but sometimes also other financial institutions),whereas capital controls can apply to all residents (though they can also be applied selectively to specific sectors). Capital controls are measures that restrict capital transactions (or transfers and payments necessary to effect them) by virtue of the residency of the parties to the transaction.4 Controls may be economywide, sector-specific (usually the financial sector), or industry specific (for example, “strategic” industries in the case of controls on FDI).Measures may apply to all flows, or may differentiate by type or duration of the flow (debt, equity, direct investment; short-term vs. medium- and long-term). Since much of our analysis focuses on the financial-sector, we distinguish between financial-sector and economy-wide capital controls below.