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From crisis to recovery: the motivations for and effects of Malaysian capital controls

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  • Anita Doraisami

    (Department of Economics, Monash University, Australia)

Abstract

The East Asian currency crisis culminated in IMF packages for all severely affected Asian crisis economies except Malaysia. Malaysia received much attention when it introduced capital controls as part of its crisis management strategy. This paper examines the effectiveness of capital controls against its objectives of regaining monetary control without precipitating capital flight. The empirical evidence supports the view that interest rates were significantly lower after capital controls were imposed and further that capital controls were not significantly undermined by capital flight. Copyright © 2004 John Wiley & Sons, Ltd.

Suggested Citation

  • Anita Doraisami, 2004. "From crisis to recovery: the motivations for and effects of Malaysian capital controls," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 241-254.
  • Handle: RePEc:wly:jintdv:v:16:y:2004:i:2:p:241-254
    DOI: 10.1002/jid.1073
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    References listed on IDEAS

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    1. Ethan Kaplan & Dani Rodrik, 2002. "Did the Malaysian Capital Controls Work?," NBER Chapters,in: Preventing Currency Crises in Emerging Markets, pages 393-440 National Bureau of Economic Research, Inc.
    2. Ilan Goldfajn & Poonam Gupta, 2003. "Does Monetary Policy Stabilize the Exchange Rate Following a Currency Crisis?," IMF Staff Papers, Palgrave Macmillan, vol. 50(1), pages 1-5.
    3. Edison, Hali J. & Reinhart, Carmen M., 1999. "Capital controls during financial crises: the cases of Malaysia and Thailand," Proceedings, Federal Reserve Bank of San Francisco, issue Sep, pages 1-36.
    4. Rudi Dornbusch, 2001. "Malaysia: Was it Different?," NBER Working Papers 8325, National Bureau of Economic Research, Inc.
    5. Richard N. Cooper, 1999. "Should Capital Controls be Banished?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 89-142.
    6. Sebastian Edwards, 1999. "How Effective Are Capital Controls?," Journal of Economic Perspectives, American Economic Association, vol. 13(4), pages 65-84, Fall.
    7. Yougesh Khatri & Il Houng Lee & O. Liu & Kanitta Meesook & Natalia T. Tamirisa, 2001. "Malaysia; From Crisis to Recovery," IMF Occasional Papers 207, International Monetary Fund.
    8. Jason Furman & Joseph E. Stiglitz, 1998. "Economic Crises: Evidence and Insights from East Asia," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(2), pages 1-136.
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    Cited by:

    1. repec:ebl:ecbull:v:5:y:2007:i:5:p:1-14 is not listed on IDEAS
    2. Jarita Duasa & Paul Mosley, 2006. "Capital Controls Re-examined: The Case for 'Smart' Controls," The World Economy, Wiley Blackwell, vol. 29(9), pages 1203-1226, September.
    3. Kim-Leng GOH & Chin-Sieng CHONG & Sook-Lu YONG, 2007. "Bank Lending Channel For Monetary Policy Transmission In Malaysia: An Ardl Approach," Applied Econometrics and International Development, Euro-American Association of Economic Development, vol. 7(2).
    4. Kim-Leng Goh & Yoke-Chen Wong & Kim-Lian Kok, 2005. "Financial Crisis and Intertemporal Linkages Across the ASEAN-5 Stock Markets," Review of Quantitative Finance and Accounting, Springer, vol. 24(4), pages 359-377, June.
    5. Kim-Leng Goh & Sook-Lu Yong, 2007. "Bank lending and monetary policy: the effects of structural shift in interest rates," Economics Bulletin, AccessEcon, vol. 5(5), pages 1-14.
    6. Moritz Cruz & Bernard Walters, 2008. "Is the accumulation of international reserves good for development?," Cambridge Journal of Economics, Oxford University Press, vol. 32(5), pages 665-681, September.

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