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The Effect of Capital Flow Management Measures in Five Asian Economies on the Foreign Exchange Market

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  • Matthew S. Yiu

    (Hong Kong Monetary Authority)

Abstract

This paper examines the effects of the capital flow management measures (CFMs) introduced by five Asian economies (Indonesia, Korea, Malaysia, the Philippines and Thailand) to deal with large capital inflows on the foreign exchange market. Using the GARCH methodology, this paper models the changes in these economies¡¦ exchange rates against the US dollar with the eight CFMs from February 2010 to March 2011 as the focal explanatory variable. The empirical results show that four CFMs stabilised the exchange rates by reducing exchange rate volatility and one had an effect on the exchange rate level. However, their effects on the currency option market were mixed.

Suggested Citation

  • Matthew S. Yiu, 2011. "The Effect of Capital Flow Management Measures in Five Asian Economies on the Foreign Exchange Market," Working Papers 412011, Hong Kong Institute for Monetary Research.
    • Handle: RePEc:hkm:wpaper:412011
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    References listed on IDEAS

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    Cited by:

    1. Chantapacdepong, Pornpinun & Shim, Ilhyock, 2015. "Correlations across Asia-Pacific bond markets and the impact of capital flow management measures," Pacific-Basin Finance Journal, Elsevier, vol. 34(C), pages 71-101.
    2. Pornpinun Chantapacdepong & Ilhyock Shim, 2014. "Correlations across Asia-Pacific bond markets and the impact of capital flow measures," BIS Working Papers 472, Bank for International Settlements.

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