Iikka Korhonen: The paper first estimates vector autoregressive models for eight Asian countries to assess the effects of U.S. monetary policy shocks. Then the paper builds a theoretical model to explain some of the findings. The authors find that capital controls give countries some degree of monetary policy independence when faced with a U.S. monetary policy shock. As such, I find this quite plausible, although I would like to see the authors describe how their results relate to Rey's (2013) notion about the “impossible dilemma.”

In the empirical specification, countries are divided into four groups:

  1. High capital control, fixed currency (China, India, Malaysia);

  2. High capital control, floating currency (Indonesia, Thailand, the Philippines);

  3. Low capital control, fixed currency (Hong Kong); and

  4. Low capital control, floating currency (Korea).

I am skeptical whether it is meaningful to group countries in this manner. Figures 1 and 2 show that countries’ exchange rate...

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