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Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia

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Author Info

  • Steinherr, Alfred

    ()
    (DIW Berlin, German Institute for Economic Research (DIW))

  • Cisotta, Alessandro
  • Klar, Erik

    ()
    (DIW Berlin German Institute for Economic Research (DIW))

  • Sehovic, Kenan

    (University of Trier)

Abstract

This paper examines capital controls in two ways. First, it assesses whether capital controls have an economic justification within the context of an economy’s and, in particular, its financial sector’s stage of development. It concludes that capital controls can be justified in countries with an immature financial sector and macroeconomic imbalances. Second, it presents survey of current capital controls in ASEAN+3. It identifies three avenues for making controls more efficient: (i) a tax on capital inflows, or alternatively, a Tobin tax; (ii) a replacement of extensive administrative controls with stricter prudential standards for financial institutions; and (iii) a special treatment for Asian currency unit (ACU) operations, implying selective capital flow liberalization.

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Bibliographic Info

Paper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 6.

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Length: 53 pages
Date of creation: 01 Nov 2006
Date of revision:
Handle: RePEc:ris:adbrei:0006

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Keywords: Economic integration; capital controls; Southeast Asia; ASEAN+3;

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References

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Cited by:
  1. Girardin Eric & Steinherr Alfred, 2009. "Regional Monetary Units for East Asia: Lessons from Europe," Working Papers id:1972, eSocialSciences.

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