A reexamination of capital controls’ effectiveness: Recent experience of Thailand
AbstractThis paper investigates the impact of the Unremunerated Reserve Requirement (URR) measure recently imposed in Thailand by applying three quantitative techniques of Edison and Reinhart (2001). We find that the URR measure was not completely effective in stabilizing the exchange rate, which was its original purpose. Although the THB onshore rate became more stable and less interdependent after the implementation of the URR, it was not completely isolated from other Asian currencies. Meanwhile, the URR measure was successful in reducing the total of net capital inflow and altering its composition toward preferable long-term investment, but it was unsuccessful in reducing short-term private external debt. In addition, since foreign equity investment was exempted from the measure, short-term capital inflows were forced to go mainly through the stock market; consequently, the URR had a limited impact on the equity market. Lastly, we find some side-effects of the measure, namely a wider spread between onshore and offshore rates, a bearish market sentiment, an obstacle to the debt market development, and a negative effect on the credibility of the Monetary Authority.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Elsevier in its journal Journal of Asian Economics.
Volume (Year): 23 (2012)
Issue (Month): 1 ()
Contact details of provider:
Web page: http://www.elsevier.com/locate/asieco
Capital controls; Exchange rate stability; Asian stock markets; Global financial crisis;
Find related papers by JEL classification:
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
- F31 - International Economics - - International Finance - - - Foreign Exchange
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
- G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ethan Kaplan & Dani Rodrik, 2001.
"Did the Malaysian Capital Controls Work?,"
NBER Working Papers
8142, National Bureau of Economic Research, Inc.
- Kaplan, Ethan & Rodrik, Dani, 2001. "Did the Malaysian Capital Controls Work?," Working Paper Series rwp01-008, Harvard University, John F. Kennedy School of Government.
- Kaplan, Ethan & Rodrik, Dani, 2001. "Did the Malaysian Capital Controls Work?," CEPR Discussion Papers 2754, C.E.P.R. Discussion Papers.
- Jacob Gyntelberg & Mico Loretan & Tientip Subhanij & Eric Chan, 2010.
"Private information, stock markets, and exchange rates,"
BIS Papers chapters,
in: Bank for International Settlements (ed.), The international financial crisis and policy challenges in Asia and the Pacific, volume 52, pages 186-210
Bank for International Settlements.
- Jacob Gyntelberg & Mico Loretan & Tientip Subhanij & Eric Chan, 2009. "Private information, stock markets, and exchange rates," BIS Working Papers 271, Bank for International Settlements.
- Jacob Gyntelberg & Mico Loretan & Tientip Subhanij & Eric Chan, 2009. "Private information, stock markets, and exchange rates," Working Papers 2009-07, Economic Research Department, Bank of Thailand.
- Bernard Laurens & Jaime Cardoso, 1998. "Managing Capital Flows," IMF Working Papers 98/168, International Monetary Fund.
- Reinhart, Carmen & Edison, Hali, 2001.
"Stopping hot money,"
13862, University Library of Munich, Germany.
- Keim, Donald B & Stambaugh, Robert F, 1984. " A Further Investigation of the Weekend Effect in Stock Returns," Journal of Finance, American Finance Association, vol. 39(3), pages 819-35, July.
- Sebastian Edwards, 1999.
"How Effective Are Capital Controls?,"
Journal of Economic Perspectives,
American Economic Association, vol. 13(4), pages 65-84, Fall.
- Salvador ValdÃ©s-Prieto & Marcelo Soto, 1998. "The Effectiveness of Capital Controls: Theory and Evidence from Chile," Empirica, Springer, vol. 25(2), pages 133-164, January.
- Michael P. Dooley, 1996. "A Survey of Literature on Controls over International Capital Transactions," IMF Staff Papers, Palgrave Macmillan, vol. 43(4), pages 639-687, December.
- Forbes, Kristin J., 2007.
"One cost of the Chilean capital controls: Increased financial constraints for smaller traded firms,"
Journal of International Economics,
Elsevier, vol. 71(2), pages 294-323, April.
- Kristin J. Forbes, 2003. "One Cost of the Chilean Capital Controls: Increased Financial Constraints for Smalles Traded Firms," NBER Working Papers 9777, National Bureau of Economic Research, Inc.
- Forbes, Kristin J., 2003. "One Cost of the Chilean Capital Controls: Increased Financial Constraints for Smaller Traded Firms," Working papers 4273-02, Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Benedict J. Clements & Herman Kamil, 2009. "Are Capital Controls Effective in the 21st Century? the Recent Experience of Colombia," IMF Working Papers 09/30, International Monetary Fund.
- Glick, Reuven & Hutchison, Michael, 2005.
"Capital controls and exchange rate instability in developing economies,"
Journal of International Money and Finance,
Elsevier, vol. 24(3), pages 387-412, April.
- Reuven Glick & Michael Hutchison, 2002. "Capital controls and exchange rate instability in developing economies," Pacific Basin Working Paper Series 2000-05, Federal Reserve Bank of San Francisco.
- French, Kenneth R., 1980. "Stock returns and the weekend effect," Journal of Financial Economics, Elsevier, vol. 8(1), pages 55-69, March.
- Abraham, Abraham & Ikenberry, David L., 1994. "The Individual Investor and the Weekend Effect," Journal of Financial and Quantitative Analysis, Cambridge University Press, vol. 29(02), pages 263-277, June.
- Honghui Chen & Vijay Singal, 2003. "Role of Speculative Short Sales in Price Formation: The Case of the Weekend Effect," Journal of Finance, American Finance Association, vol. 58(2), pages 685-706, 04.
- Lakonishok, Josef & Maberly, Edwin, 1990. " The Weekend Effect: Trading Patterns of Individual and Institutional Investors," Journal of Finance, American Finance Association, vol. 45(1), pages 231-43, March.
- Jonathan David Ostry & Atish R. Ghosh & Karl Friedrich Habermeier & Luc Laeven & Marcos Chamon & Mahvash Saeed Qureshi & Annamaria Kokenyne, 2011. "Managing Capital Inflows," IMF Staff Discussion Notes 11/06, International Monetary Fund.
- Jacob Gyntelberg & Subhanij Tientip & Mico Loretan, 2012. "Exchange Rate Fluctuations and International Portfolio Rebalancing in Thailand," IMF Working Papers 12/214, International Monetary Fund.
- Jacob Gyntelberg & Subhanij Tientip & Mico Loretan, 2012. "Private Information, Capital Flows, and Exchange Rates," IMF Working Papers 12/213, International Monetary Fund.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.