Comments on “Effectiveness of Capital Controls: Evidence from Thailand”. Asian Development Review, Vol. 29(2), pp. 94-95
Remolona, Eli | August 2012
Abstract
The paper finds that the different types of capital controls are effective in
terms of affecting the volume and composition of flows. Using the real effective
exchange rate, however, it finds that capital controls do not relieve the pressure of
the domestic currency to appreciate. It also looks at two measures of volatility
based on the nominal exchange rate to the dollar and the export-weighted bilateral
exchange rate and confirms that capital controls stabilize the exchange rate.
The paper likewise examines whether capital controls affect monetary
independence. However, I think the duration of maturities of the interest rates
used to derive the interest rate differentials (i.e., between the 14-day repurchase
rate and the US 3-month Treasury bill rate) are non-matching. In examining the
effect of capital controls on monetary autonomy, instead of looking at the policy
rates, I think one must look at the interest rates that matter that are further down
the yield curve. In the case of the US, for instance, the interest rates that matter
are somewhere between the 2-year and 5-year interest rates.
The paper also examines whether controls prevent a crisis. However, this
aspect is difficult to examine in the context of one country. I think it is better
examined in a cross-country study.
Citation
Remolona, Eli. 2012. Comments on “Effectiveness of Capital Controls: Evidence from Thailand”. Asian Development Review, Vol. 29(2), pp. 94-95. © Asian Development Bank. http://hdl.handle.net/11540/1638. License: CC BY 3.0 IGO.Citable URI
http://hdl.handle.net/11540/1638Metadata
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