When are Capital Controls Effective? Evidence from Malaysia and Thailand

51 Pages Posted: 13 Jun 2011

See all articles by Juthathip Jongwanich

Juthathip Jongwanich

Australian National University (ANU) - Research School of Pacific and Asian Studies (RSPAS)

Maria Socorro Gochoco‐Bautista

University of the Philippines, School of Economics

Jong-Wha Lee

Korea University

Date Written: March 2011

Abstract

This study examines the impact of capital controls using monthly information to construct higher-frequency, quarterly indexes for Malaysia during the period 2000–2008 and Thailand over the period 2000–2010 in a vector auto-regression model. The results show that restrictions in Thailand have no significant effect on inflows but are especially effective for outflows, particularly foreign direct investment. In Malaysia, capital relaxation tends to have a significant impact on inward foreign direct investment and portfolio inflows. Changes in capital account policies do not have a significant impact on the real exchange rate in Malaysia and Thailand.

Keywords: capital flows, capital controls, financial integration, Asia, Economics Working Paper Number 251

JEL Classification: F21, F32, F36, F41, G15

Suggested Citation

Jongwanich, Juthathip and Gochoco-Bautista, Maria Socorro and Lee, Jong-Wha, When are Capital Controls Effective? Evidence from Malaysia and Thailand (March 2011). Asian Development Bank Economics Working Paper No. 251. Available at SSRN: https://ssrn.com/abstract=1859769 or http://dx.doi.org/10.2139/ssrn.1859769

Juthathip Jongwanich (Contact Author)

Australian National University (ANU) - Research School of Pacific and Asian Studies (RSPAS) ( email )

Division of Economics, RSPAS
Canberra, Australian Capital Territory 0200
Australia

Maria Socorro Gochoco-Bautista

University of the Philippines, School of Economics ( email )

Quezon City, Diliman
Philippines

Jong-Wha Lee

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

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