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

Author

Listed:
  • 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 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.

Suggested Citation

  • Steinherr, Alfred & Cisotta, Alessandro & Klar, Erik & Sehovic, Kenan, 2006. "Liberalizing Cross-Border Capital Flows: How Effective Are Institutional Arrangements against Crisis in Southeast Asia," Working Papers on Regional Economic Integration 6, Asian Development Bank.
    • Handle: RePEc:ris:adbrei:0006
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    1. Gang Fan & Bijun Wang & Yiping Huang, 2013. "Intraregional Cross-holding of Reserve Currencies: A Proposal for Asia to Deal with the Global Reserve Risks," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 21(4), pages 14-35, July.
    2. Girardin Eric, 2009. "Regional Monetary Units for East Asia: Lessons from Europe," Working Papers id:1972, eSocialSciences.

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    More about this item

    Keywords

    Economic integration; capital controls; Southeast Asia; ASEAN+3;
    All these keywords.

    JEL classification:

    • F15 - International Economics - - Trade - - - Economic Integration
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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