IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Malaysian capital controls

  • Hood, Ron
Registered author(s):

    Malaysian authorities implemented controls on international capital flows late in the Asian crisis, when most of the portfolio outflows had already occurred. The exchange rate had depreciated sharply and was fixed at an undervalued level, making further capital flight unlikely. The turnaround in the stock market, the return of positive GDP growth, the building of reserves, and the relaxation of interest rates all coincided with the imposition of controls. But the same changes took place in other crisis countries that did not follow the same control policies. However, the controls provided insurance against the consequences of possible further disturbances. They created a breathing space for making needed reforms, and the authorities made good use of this time, stabilizing the financial system and pushing ahead with regulatory and supervisory reform for the financial sector and capital markets - a prerequisite for fully liberalizing the capital account. Malaysia incurred a cost: an additional 300 basis point spread paid on floating rate debt for a period after the controls were instituted. But the exit strategy has so far not resulted in lasting flight of portfolio capital. Foreign direct investment remains below precrisis levels, but it is not possible at this stage to attribute this to the effect of controls. On balance, it appears that both the benefits from and the costs of the controls have been modest.

    If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

    File URL:
    Download Restriction: no

    Paper provided by The World Bank in its series Policy Research Working Paper Series with number 2536.

    in new window

    Date of creation: 31 Jan 2000
    Date of revision:
    Handle: RePEc:wbk:wbrwps:2536
    Contact details of provider: Postal: 1818 H Street, N.W., Washington, DC 20433
    Phone: (202) 477-1234
    Web page:

    More information through EDIRC

    No references listed on IDEAS
    You can help add them by filling out this form.

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    When requesting a correction, please mention this item's handle: RePEc:wbk:wbrwps:2536. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Roula I. Yazigi)

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.