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“Capital mobility in East Asian Countries is not so high”: Examining the impact of sterilization on capital flows

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  • Ying, Yung-Hsiang
  • Kuan, Chung-Ming
  • Tung, Chris Y.
  • Chang, Koyin

Abstract

This paper examines how international capital mobility can be affected by sterilization activities for seven East Asian economies. We develop a model that shows how sterilization measures by a central bank can lead to a reduction in a country's capital mobility. Using data from 1980 to 2006, we then derive sterilization intensities and capital mobility estimates for our countries, and discover that conventional measures overstate the degree of capital mobility due to their failure to adjust for sterilization actions. Our findings are important for policy makers since using our modified estimates will help to better understand the magnitude of capital mobility when central banks exercise sterilization to dampen the effect of capital inflows.

Suggested Citation

  • Ying, Yung-Hsiang & Kuan, Chung-Ming & Tung, Chris Y. & Chang, Koyin, 2013. "“Capital mobility in East Asian Countries is not so high”: Examining the impact of sterilization on capital flows," China Economic Review, Elsevier, vol. 24(C), pages 55-64.
    • Handle: RePEc:eee:chieco:v:24:y:2013:i:c:p:55-64
    DOI: 10.1016/j.chieco.2012.11.001
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    2. Baharumshah, Ahmad Zubaidi & Soon, Siew-Voon & Wohar, Mark E., 2017. "Markov-switching analysis of exchange rate pass-through: Perspective from Asian countries," International Review of Economics & Finance, Elsevier, vol. 51(C), pages 245-257.

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    More about this item

    Keywords

    Capital mobility; Sterilization; Capital movement;
    All these keywords.

    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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