Conclusion
The paper has reviewed policies taken to address capital flows in Malaysia from
1999 to 2007. 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. However, capital flows are
sensitive to any change in risk appetite. Accordingly, the national monetary authority
may need to pursue active monitoring of capital flows. Having sound policies,
financial sector resilience, large reserves, a flexible exchange rate, and a strong
domestic sector may be useful in facing increasingly volatile capital flows.
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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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