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Capital Controls and Capital Flows in Emerging EconomiesPolicies, Practices, and Consequences$
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Sebastian Edwards

Print publication date: 2007

Print ISBN-13: 9780226184975

Published to Chicago Scholarship Online: February 2013

DOI: 10.7208/chicago/9780226184999.001.0001

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Malaysian Capital Controls: Macroeconomics and Institutions

Malaysian Capital Controls: Macroeconomics and Institutions

(p.529) 11 Malaysian Capital Controls: Macroeconomics and Institutions
Capital Controls and Capital Flows in Emerging Economies

Simon Johnson

Kalpana Kochhar

Todd Mitton

Natalia Tamirisa

University of Chicago Press

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

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