Abstract

GARCIA, Clara. Capital inflows, policy responses, and their adverse effects: Thailand, Malaysia, and Indonesia in the decade before the crises. Prob. Des [online]. 2007, vol.38, n.148, pp.9-39. ISSN 0301-7036.

Capital inflows, especially when volatile and in foreign currencies, lead to macroeconomic and financial fragilities in the recipient economy. There is no consensus on which policies are best for tackling these problems. In this study, we try to find a unique criterion (a unifying lens) with which to assess the various policy alternatives for the cases where capital inflows -have been the result of stabilization and liberalization: the policies that might be most effective are those that depart from the stabilization and liberalization trend (i.e. capital controls, adjustments to currency regimes, or strengthened financial regulations). We support this idea with both theoretical arguments and case studies of Thailand, Malaysia, and Indonesia in the years prior to the 1997-1998 crises.

Keywords : South East Asia; capital inflows; economic policy; financial fragility.

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