Malaysian Capital Controls: Macroeconomics and Institutions

Author/Editor: Johnson, Simon ; Kochhar, Kalpana ; Mitton, Todd ; Tamirisa, Natalia T.
Publication Date: February 01, 2006
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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. 06/51
Subject(s): Capital controls | Malaysia | Financial crisis | Political economy | Stock markets

Author's Keyword(s): Malaysia | capital controls | Asian crisis | political connections | stock markets
Publication Date: February 01, 2006
ISBN/ISSN: 1934-7073 Format: Paper
Stock No: WPIEA2006051 Pages: 51
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