Malaysian Capital Controls: Macroeconomics and Institutions

Simon Johnson, Kalpana Kochhar, Todd Mitton and Natalia Tamirisa

in Capital Controls and Capital Flows in Emerging Economies

Published by University of Chicago Press

Published in print May 2007 | ISBN: 9780226184975
Published online February 2013 | e-ISBN: 9780226184999 | DOI:
Malaysian Capital Controls: Macroeconomics and Institutions

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This chapter assesses the Malaysia's experience with capital controls in 1998–99. There is no evidence suggesting that the imposition of the controls had negative macroeconomic effects. Additionally, there is no data indicating that capital controls made a visible difference in Malaysia's recovery process. The market interpreted the policies of July 1997 to August 1998 as squeezing politically connected firms. Macroeconomic policy remained cautious and responsible after the controls were imposed. The results of the key macroeconomic and financial indicators confirm the empirical findings that Malaysia's macroeconomic performance after the imposition of capital controls was comparable to that of other countries recovering from the Asian financial crisis. Malaysia's successful recovery resulted from the country's strong fundamentals, sound policies, and effective institutions, rather than from capital controls.

Keywords: capital controls; Malaysia; market; firms; macroeconomic policy; Asian financial crisis; institutions

Chapter.  17914 words.  Illustrated.

Subjects: Macroeconomics and Monetary Economics

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