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Capital Market Liberalization and Development$
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José Antonio Ocampo and Joseph E. Stiglitz

Print publication date: 2008

Print ISBN-13: 9780199230587

Published to Oxford Scholarship Online: May 2008

DOI: 10.1093/acprof:oso/9780199230587.001.0001

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Capital Management Techniques in Developing Countries: Managing Capital Flows in Malaysia, India, and China

Capital Management Techniques in Developing Countries: Managing Capital Flows in Malaysia, India, and China

Chapter:
(p.139) 6 Capital Management Techniques in Developing Countries: Managing Capital Flows in Malaysia, India, and China
Source:
Capital Market Liberalization and Development
Author(s):

Gerald Epstein

Ilene Grabel

K. S. Jomo

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780199230587.003.0006

This chapter uses the term capital management techniques to refer to two complementary and often overlapping types of financial policies: policies that govern international private capital flows, and those that enforce prudential management of domestic financial institutions. While the management of inflows has recently gained some respectability, those policies affecting capital outflows, especially if they have been in place for long periods of time, are still controversial. The chapter presents case studies of the capital management techniques employed in India, China, and Malaysia — three countries that managed capital outflows during the 1990s. The cases reveal that policymakers were able to use capital management techniques to achieve critical macroeconomic objectives, including the prevention of maturity and locational mismatch, attraction of favoured forms of foreign investment; reduction in overall financial fragility, currency risks, and speculative pressures on the economy; insulation from the contagion effects of financial crises; and enhancement of the autonomy of economic and social policy. The chapter examines the structural factors that contributed to these achievements, and weighs the costs associated with these measures against their macroeconomic benefits.

Keywords:   private capital, financial institutions, capital outflows, India, China, Malaysia, currency

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