Malaysian Capital Controls: Macroeconomics and Institutions

Author/Editor:

Natalia T. Tamirisa ; Simon Johnson ; Kalpana Kochhar ; Todd Mitton

Publication Date:

February 1, 2006

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

We analyze the capital controls imposed in Malaysia in September 1998. In macroeconomic terms, these controls neither yielded major benefits nor were costly. At the same time, the stock market interpreted the capital controls (and associated events) as favoring firms with stronger political connections, and some connected firms reportedly received advantages immediately following the crisis. Analysis of financial accounts indicates that connected firms outperformed unconnected firms before the 1997-98 crisis but not afterward. After the crisis, connected firms were either not supported as much as the market had expected or the benefits they received were not manifest in their published accounts.

Series:

Working Paper No. 2006/051

Subject:

Banking Capital controls Currencies Financial crises Foreign exchange transactions

English

Publication Date:

February 1, 2006

ISBN/ISSN:

9781451863116/1018-5941

Stock No:

WPIEA2006051

Pages:

51

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