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The Stabilization of an Open Economy with Capital Controls: An Analysis Using Malaysian Data

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Author Info

  • Naoyuki Yoshino

    (Professor of Economics Keio University 2-15-45 Mita Minato-ku Tokyo 108-8345 Japan)

  • Sahoko Kaji

    (Professor of Economics Keio University 2-15-45 Mita Minato-ku Tokyo 108-8345 Japan)

  • Yoko Ibuka

    (Graduate Program Department of Economics Rutgers University 75 Hamilton Street, New Jersey Hall New Brunswick, NJ 08901-1248 USA)

Abstract

The purpose of this paper is to analyze the effectiveness of capital controls and fixed exchange rates in improving economic welfare. We apply Malaysian data to our theoretical model and derive the following results for the period of our estimation. High exchange rate volatility negatively affects Malaysian net exports and real GDP. By stabilizing the exchange rate and recovering monetary policy autonomy, capital controls and fixed exchange rates can lead to lower values of loss functions. This beneficial effect is stronger, the more open the Malaysian economy. Copyright (c) 2004 The Earth Institute at Columbia University and the Massachusetts.

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Bibliographic Info

Article provided by MIT Press in its journal Asian Economic Papers.

Volume (Year): 2 (2003)
Issue (Month): 3 ()
Pages: 63-83

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Handle: RePEc:tpr:asiaec:v:2:y:2003:i:3:p:63-83

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Cited by:
  1. Naoyuki Yoshino & Sahoko Kaji & Tamon Asonuma, 2011. "Dynamic Effect of Change in Exchange Rate System -From the Fixed Exchange Rate Regime to the Basket-peg or Floating Regime," Keio/Kyoto Joint Global COE Discussion Paper Series 2011-026, Keio/Kyoto Joint Global COE Program.

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