The Malaysian Capital Controls: A Success Story?

Prema-chandra Athukorala

Departmental Working Papers from The Australian National University, Arndt-Corden Department of Economics

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.

Keywords: Asian financial crisis; Capital controls; Malaysia (search for similar items in EconPapers)
JEL-codes: F32 F41 O53 (search for similar items in EconPapers)
Pages: 62 pages
Date: 2007
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