Managing Capital Flows: The Case of Malaysia
 This paper reviews policies taken to address capital flows in Malaysia from 1999 to 2007 and offers recommendations for managing capital flows. Strong macroeconomic fundamentals and a global search for yields will continue to shift more capital into Asia. This trend is expected to prevail at least in the medium term, given structural weakness in the US.
In the face of these increasingly volatile capital flows and their repercussions on the domestic economy, the monetary authority needs to pursue active monitoring and intervention. Moreover, having a resilient financial sector with prudential regulations may help overcome the negative effects of capital reversal. Other conditions include sound macroeconomic policies, a strong domestic sector, and large international reserves.
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The views expressed in this paper are the views of the authors and do not necessarily reflect the views or policies of the Asian Development Bank Institute (ADBI), the Asian Development Bank (ADB), its Board of Directors, or the governments they represent. ADBI does not guarantee the accuracy of the data included in this paper and accepts no responsibility for any consequences of their use. Terminology used may not necessarily be consistent with ADB official terms.
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