IDEAS home Printed from https://ideas.repec.org/p/pas/papers/2007-07.html
   My bibliography  Save this paper

The Malaysian Capital Controls: A Success Story?

Author

Listed:
  • Prema-Chandra Athukorala

Abstract

This paper aims to contribute to the debate on the use of temporary controls on capital outflows as a crisis resolution measure my examining the outcome of Malaysia’s radical response to the 1997-98 financial crisis. The analysis suggests that carefully designed temporary capital controls were successful in providing Malaysian policy makers a viable setting for aiding the recovery process through the standard Keynesian therapy. Capital controls also assisted banking and corporate restructuring by facilitating the mobilization of domestic resources, and more importantly, by providing a cushion against possible adverse impact on market sentiment of 'national' initiatives. Of course other countries should be cautious in deriving policy lessons from Malaysia because a number of factors specific to Malaysia seem to have significantly conditioned the outcome of the capital-control based recovery package.

Suggested Citation

  • Prema-Chandra Athukorala, 2007. "The Malaysian Capital Controls: A Success Story?," Departmental Working Papers 2007-07, The Australian National University, Arndt-Corden Department of Economics.
    • Handle: RePEc:pas:papers:2007-07
    as

    Download full text from publisher

    File URL: https://crawford.anu.edu.au/acde/publications/publish/papers/wp2007/wp-econ-2007-07.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Prema-chandra Athukorala, 2001. "Crisis and Recovery in Malaysia," Books, Edward Elgar Publishing, number 2340.
    2. Edwards, Sebastian & Frankel, Jeffrey A. (ed.), 2002. "Preventing Currency Crises in Emerging Markets," National Bureau of Economic Research Books, University of Chicago Press, edition 1, number 9780226184944, October.
    3. Prema‐chandra Athukorala & Peter G. Warr, 2002. "Vulnerability to a Currency Crisis: Lessons from the Asian Experience," The World Economy, Wiley Blackwell, vol. 25(1), pages 33-57, January.
    4. Hali J. Edison & Carmen M. Reinhart, 1999. "Capital controls during financial crises: the cases of Malaysia and Thailand," Proceedings, Federal Reserve Bank of San Francisco, issue Sep, pages 1-36.
    5. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
    6. Miller, Merton H., 2000. "Reflections of a retiring Keynote Speaker," Pacific-Basin Finance Journal, Elsevier, vol. 8(3-4), pages 277-283, July.
    7. Stephan Haggard, 2000. "Political Economy of the Asian Financial Crisis, The," Peterson Institute Press: All Books, Peterson Institute for International Economics, number 107, April.
    8. Richard N. Cooper, 1999. "Should Capital Controls be Banished?," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 30(1), pages 89-142.
    9. Prema-chandra Athukorala, 2007. "Multinational Enterprises in Asian Development," Books, Edward Elgar Publishing, number 12632.
    10. Sebastian Edwards & Jeffrey A. Frankel, 2002. "Preventing Currency Crises in Emerging Markets," NBER Books, National Bureau of Economic Research, Inc, number edwa02-2, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Chokri Zehri, 2022. "Conditions for the success of capital controls: The elasticity approach," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(1), pages 893-910, January.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Anita Doraisami, 2004. "From crisis to recovery: the motivations for and effects of Malaysian capital controls," Journal of International Development, John Wiley & Sons, Ltd., vol. 16(2), pages 241-254.
    2. Mardi Dungey & Rene Fry & Vance L. Martin, 2006. "Correlation, Contagion, and Asian Evidence," Asian Economic Papers, MIT Press, vol. 5(2), pages 32-72, Spring/Su.
    3. Athukorala, Prema-Chandra & Jongwanich, Juthathip, 2012. "How Effective are Capital Controls? Evidence from Malaysia," Asian Development Review, Asian Development Bank, vol. 29(2), pages 1-47.
    4. Glick, Reuven & Hutchison, Michael, 2011. "The illusive quest: Do international capital controls contribute to currency stability?," International Review of Economics & Finance, Elsevier, vol. 20(1), pages 59-70, January.
    5. Walter, Stefanie, 2008. "A New Approach for Determining Exchange-Rate Level Preferences," International Organization, Cambridge University Press, vol. 62(3), pages 405-438, July.
    6. Martínez, Juan & Santiso, Javier, 2003. "Financial Markets and Politics: The Confidence Game in Latin American Emerging Economies," MPRA Paper 12909, University Library of Munich, Germany.
    7. Gerardo Esquivel & Felipe Larraín, 2003. "¿Qué Sabemos Realmente sobre las Crisis Cambiarias?," Latin American Journal of Economics-formerly Cuadernos de Economía, Instituto de Economía. Pontificia Universidad Católica de Chile., vol. 40(121), pages 656-667.
    8. Frankel, Jeffrey, 2010. "Monetary Policy in Emerging Markets," Handbook of Monetary Economics, in: Benjamin M. Friedman & Michael Woodford (ed.), Handbook of Monetary Economics, edition 1, volume 3, chapter 25, pages 1439-1520, Elsevier.
    9. Hal Hill, 2018. "Southeast Asia in the global economy: a selective analytical survey," Departmental Working Papers 2018-12, The Australian National University, Arndt-Corden Department of Economics.
    10. Glick, Reuven & Hutchison, Michael, 2005. "Capital controls and exchange rate instability in developing economies," Journal of International Money and Finance, Elsevier, vol. 24(3), pages 387-412, April.
    11. de Gregorio, José & Goldfajn, Ilan, 2004. "Comments," LSE Research Online Documents on Economics 123339, London School of Economics and Political Science, LSE Library.
    12. Jeffrey A. Frankel & Shang-Jin Wei, 2004. "Managing Macroeconomic Crises," NBER Working Papers 10907, National Bureau of Economic Research, Inc.
    13. Nicolas E. Magud & Carmen M. Reinhart & Kenneth S. Rogoff, 2018. "Capital Controls: Myth and Reality--A Portfolio Balance Approach," Annals of Economics and Finance, Society for AEF, vol. 19(1), pages 1-47, May.
    14. Barbara Stallings, 2004. "Financial Liberalization, Crisis, and Rescue: Lessons for China from Latin America and East Asia?," IDB Publications (Working Papers) 48078, Inter-American Development Bank.
    15. Julian A. Parra-Polania & Carmiña O. Vargas, 2015. "Macroprudential vs. Ex-post Policy Interventions: when Domestic Taxes are Relevant for International Lenders," Borradores de Economia 12698, Banco de la Republica.
    16. Durdu, Ceyhun Bora & Mendoza, Enrique G., 2006. "Are asset price guarantees useful for preventing Sudden Stops?: A quantitative investigation of the globalization hazard-moral hazard tradeoff," Journal of International Economics, Elsevier, vol. 69(1), pages 84-119, June.
    17. Vijay Joshi, 2003. "Financial Globalisation, Exchange Rates and Capital Controls in Developing Countries," Departmental Working Papers 2003-19, The Australian National University, Arndt-Corden Department of Economics.
    18. Eduardo A. Cavallo, 2005. "Trade, gravity, and sudden stops: on how commercial trade can increase the stability of capital flows," FRB Atlanta Working Paper 2005-23, Federal Reserve Bank of Atlanta.
    19. Nicolas Magud & Carmen M. Reinhart, 2007. "Capital Controls: An Evaluation," NBER Chapters, in: Capital Controls and Capital Flows in Emerging Economies: Policies, Practices, and Consequences, pages 645-674, National Bureau of Economic Research, Inc.
    20. Ajit Singh, 2003. "Competition, corporate governance and selection in emerging markets," Economic Journal, Royal Economic Society, vol. 113(491), pages 443-464, November.

    More about this item

    Keywords

    Asian financial crisis; Capital controls; Malaysia;
    All these keywords.

    JEL classification:

    • F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pas:papers:2007-07. See general information about how to correct material in RePEc.

    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 CitEc recognized a bibliographic reference but did not link an item in RePEc 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Prema-chandra Athukorala (email available below). General contact details of provider: https://edirc.repec.org/data/asanuau.html .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.