How Effective are Capital Controls? Evidence from Malaysia. Asian Development Review, Vol. 29(2), pp. 1-47
Athukorala, Prema-chandra; Jongwanich, Juthathip | August 2012
Abstract
This paper examines the role of capital controls as a macroeconomic policy
tool in light of the Malaysian experience. It consists of an econometric
analysis of quarterly data over the period 1990–2010 using newly constructed
capital inflow and outflow policy indexes as well as analytical narratives of
episodes of controls imposed on inflows (1994) and outflows (1998–1999).
The findings suggest that well-targeted controls have the potential to tame
both short-term capital inflows and outflows without exerting a backwash
effect on foreign direct investment, at least in the short to medium term.
Controls on capital inflows introduced in the first half of 1994 helped
moderate accumulation of short-term capital flows, particularly short-term
bank credit. During 1998–1999, carefully designed temporary capital controls
were successful in providing Malaysian policymakers a viable setting for
applying the standard Keynesian therapy.
Citation
Athukorala, Prema-chandra; Jongwanich, Juthathip. 2012. How Effective are Capital Controls? Evidence from Malaysia. Asian Development Review, Vol. 29(2), pp. 1-47. © Asian Development Bank. http://hdl.handle.net/11540/1641. License: CC BY 3.0 IGO.Citable URI
http://hdl.handle.net/11540/1641Metadata
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