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

Listed author(s):
  • 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)

This paper examines capital controls in two ways. First, it assesses whether capital controls have an economic justification within the context of an economyâÂÂs and, in particular, its financial sectorâÂÂs 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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File URL: http://aric.adb.org/pdf/workingpaper/WP06_Steinherretal.pdf
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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
Handle: RePEc:ris:adbrei:0006
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