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Publisher: Journals Gateway
Asian Economic Papers (2002) 1 (1): 49–82.
Published: 01 January 2002
Abstract
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In 1998 and 1999, following the East Asian financial crisis, Malaysia imposed a set of constraints and taxes on the movement of capital out of the country. Using a quantitative equilibrium model, we attempt to construct estimates of the effects of these controls on Malaysia's recovery from the crisis. The analysis relies on a model of a dependent economy with taxation on capital movements. We focus on the aftermath of a financial panic (the East Asian crisis) in which effective international interest rates rise. Capital taxation implicitly ameliorates the brunt of such a rise in the interest rate and substantially limits its real effects. This amelioration is shown to be especially significant under fixed exchange rates.