Regulating Short-Term Capital Flows

This July marks the second year "anniversary" of the Thai baht
devaluation – the one that started the Asian currency crisis. In its
aftermath, quite a number of realizations are now evident. This paper
seeks to present further analyses and lessons as well as pose some
policy proposals.

This July marks the second year "anniversary" of the Thai baht
devaluation – the one that started the Asian currency crisis. In its
aftermath, quite a number of realizations are now evident. This paper
seeks to present further analyses and lessons as well as pose some
policy proposals. It has four parts. First, it presents the data and
the analysis of the currency turmoil as it relates to short-term
capital flows of Asian countries and more specifically, the
Philippines. Second, a framework for classifying the types of capital
regulation that may be employed is presented together with a cursory
look at the intervention done by various countries in Asia and Latin
America. Third, the cases of Hong Kong, which is one of the freest
economies in the world, and Taiwan, viewed and envied by many as a
country with strong economic fundamentals, are discussed to show that
capital control is not dreadful; it is being done by any country and
economy, regardless of the type and orientation of economy. Finally,
based on the previous discussions, the paper offers five policy
proposals for adoption for the Philippines and one policy proposal for
the consideration of Asian governments.

Read full text (.pdf, 230kb, 25pp.)

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