Capital inflows and the interest premium problem: The effects of monetary sterilisation in selected Asian economies

Tony Cavoli and Ramkishen Rajan

International Review of Economics & Finance, 2015, vol. 39, issue C, 1-18

Abstract: Sterilisation of capital inflows remains a pertinent policy option for many Southeast Asian economies. This paper examines some of the possible consequences of complete and incomplete sterilisation by examining its effect on domestic interest rates. We find that there is evidence to suggest that sterilisation influences local rates directly, but the relationship may not be sufficient to preserve interest differentials or to substantially soften the effects of global liquidity transfers into domestic financial market conditions.

Keywords: Monetary Sterilisation; Interest rates; Asia (search for similar items in EconPapers)
JEL-codes: E52 F33 (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:39:y:2015:i:c:p:1-18

DOI: 10.1016/j.iref.2015.05.002

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