Malaysian Capital Controls: Macroeconomics and Institutions

51 Pages Posted: 23 Mar 2006

See all articles by Simon Johnson

Simon Johnson

International Monetary Fund (IMF)

Kalpana Kochhar

International Monetary Fund (IMF)

Todd Mitton

Brigham Young University - J. Willard and Alice S. Marriott School of Management

Natalia T. Tamirisa

International Monetary Fund (IMF)

Date Written: February 2006

Abstract

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.

Keywords: Malaysia, capital controls, Asian crisis, political connections, stock markets

JEL Classification: F21, F32, F40, G18, G30

Suggested Citation

Johnson, Simon and Kochhar, Kalpana and Mitton, Todd and Tamirisa, Natalia T., Malaysian Capital Controls: Macroeconomics and Institutions (February 2006). IMF Working Paper, Vol. , pp. 1-51, 2006. Available at SSRN: https://ssrn.com/abstract=892942

Simon Johnson

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Kalpana Kochhar

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

Todd Mitton

Brigham Young University - J. Willard and Alice S. Marriott School of Management ( email )

Provo, UT 84602
United States
801-422-1763 (Phone)

Natalia T. Tamirisa

International Monetary Fund (IMF) ( email )

700 19th Street NW
Washington, DC 20431
United States

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