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Effectiveness of Capital Controls: Evidence from Thailand

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    This paper examines the effectiveness of capital account policies in Thailand during the period 1993–2010. Our results show that policies toward capital account liberalization tend to be more effective than those toward capital account restriction in changing the volume of capital flows. The composition of capital flows also matters for the effectiveness of policy measures. When capital restrictions were introduced in the late 2000s, our results show that there was a switching effect from more capital restricted asset classes toward less restricted ones. This study also finds that the central bank did not gain more monetary autonomy from introducing capital inflow restrictions. However, such restrictions, both inflows and outflows liability side), could help limit the fluctuations in the nominal exchange rate, especially relative to the US dollar in 2000–2010.

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    Article provided by Asian Development Bank in its journal Asian Development Review.

    Volume (Year): 29 (2012)
    Issue (Month): 2 ()
    Pages: 50-93

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    Handle: RePEc:ris:adbadr:2746
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    1. Natalia T. Tamirisa, 1998. "Exchange and Capital Controls as Barriers to Trade," IMF Working Papers 98/81, International Monetary Fund.
    2. Akira Ariyoshi & Andrei Kirilenko & Inci Ötker & Bernard Laurens & Jorge Iván Canales Kriljenko & Karl Friedrich Habermeier, 2000. "Capital Controls: Country Experiences with Their Use and Liberalization," IMF Occasional Papers 190, International Monetary Fund.
    3. Edison, Hali & Reinhart, Carmen M., 2001. "Stopping hot money," Journal of Development Economics, Elsevier, vol. 66(2), pages 533-553, December.
    4. Mody, Ashoka & Murshid, Antu Panini, 2005. "Growing up with capital flows," Journal of International Economics, Elsevier, vol. 65(1), pages 249-266, January.
    5. Nicolas Magud & Carmen M. Reinhart, 2006. "Capital Controls: An Evaluation," NBER Working Papers 11973, National Bureau of Economic Research, Inc.
      • Nicolas Magud & Carmen M. Reinhart, 2007. "Capital Controls: An Evaluation," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices and Consequences, pages 645-674 National Bureau of Economic Research, Inc.
    6. Martin Schindler, 2009. "Measuring Financial Integration: A New Data Set," IMF Staff Papers, Palgrave Macmillan, vol. 56(1), pages 222-238, April.
    7. Edwards, Sebastian, 2007. "Capital controls, capital flow contractions, and macroeconomic vulnerability," Journal of International Money and Finance, Elsevier, vol. 26(5), pages 814-840, September.
    8. Nicolas E. Magud & Carmen M. Reinhart & Kenneth S. Rogoff, 2011. "Capital Controls: Myth and Reality - A Portfolio Balance Approach," NBER Working Papers 16805, National Bureau of Economic Research, Inc.
    9. Bruno Coelho & Kevin Gallagher, 2010. "Capital Controls and 21st Century Financial Crises: Evidence from Colombia and Thailand," Working Papers wp213, Political Economy Research Institute, University of Massachusetts at Amherst.
    10. Maria Socorro Gochoco-Bautista & Juthathip Jongwanich & Jong-Wha Lee, 2012. "How Effective Are Capital Controls in Asia?," Asian Economic Papers, MIT Press, vol. 11(2), pages 122-143, June.
    11. Christopher J. Neely, 1999. "An introduction to capital controls," Review, Federal Reserve Bank of St. Louis, issue Nov, pages 13-30.
    12. Sebastian Edwards, 1999. "How Effective are Capital Controls?," NBER Working Papers 7413, National Bureau of Economic Research, Inc.
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