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Did the Malaysian Capital Controls Work?

  • Ethan Kaplan
  • Dani Rodrik

Malaysia recovered from the Asian financial crisis swiftly after the imposition of capital controls in September 1998. The fact that Korea and Thailand recovered in parallel has been interpreted as suggesting that capital controls did not play a significant role in facilitating Malaysia's rebound. However, the financial crisis was deepening in Malaysia in the summer of 1998, while it had significantly eased up in Korea and Thailand. We employ a time-shifted differences-in- differences technique to exploit the differences in the timing of the crises. Compared to IMF programs, we find that the Malaysian policies produced faster economic recovery, smaller declines in employment and real wages, and more rapid turnaround in the stock market.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 8142.

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Date of creation: Feb 2001
Date of revision:
Publication status: published as Did the Malaysian Capital Controls Work? , Ethan Kaplan, Dani Rodrik. in Preventing Currency Crises in Emerging Markets , Edwards and Frankel. 2002
Handle: RePEc:nbr:nberwo:8142
Note: IFM
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  1. Reinhart, Carmen & Edison, Hali, 2001. "Stopping hot money," MPRA Paper 13862, University Library of Munich, Germany.
  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. Steven Radelet & Jeffrey Sachs, 2000. "The Onset of the East Asian Financial Crisis," NBER Chapters, in: Currency Crises, pages 105-153 National Bureau of Economic Research, Inc.
  4. Carmen M. Reinhart & R. Todd Smith, 1996. "Too much of a good thing: the macroeconomic effects of taxing capital inflows," Proceedings, Federal Reserve Bank of San Francisco, pages 436-464.
  5. Peter M. Garber, 1998. "Derivatives in International Capital Flows," NBER Working Papers 6623, National Bureau of Economic Research, Inc.
  6. Dani Rodrik & Andres Velasco, 1999. "Short-Term Capital Flows," NBER Working Papers 7364, National Bureau of Economic Research, Inc.
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