This paper analyzes the effects of capital control policies in a portfolio-balance framework. Capital controls are modeled as a licensing fee that the authorities charge for transactions on world capital markets. Both fixed and floating exchange rate regimes are considered. According to the results capital control policies seem to be best suited for achieving balance-of-payments or exchange-rate targets. It is also shown that the effects of capital controls are more ambiguous in a floating exchange rate regime than in a fixed exchange rate regime.