Author(s) |
Jayasuriya, Sisira
Leu, Shawn
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Publication Date |
2012
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Abstract |
Indonesia has operated a liberal capital account permitting relatively free flow of international non-FDI flows since the early 1970s. In this paper, we review the Indonesian experience and the effectiveness of capital restrictions during 1990-2010 using a SVAR model of the Indonesian economy. Because of severe data problems in the pre-1997 period and because the Indonesian monetary policy and broader macroeconomic regime underwent fundamental changes since the 1997 crisis, we also estimated a model separately for the 2000-2010 period. Both sets of results suggest that inflow and outflow restrictions have been effective for FDI but largely ineffective for portfolio capital. However, the 2000-2010 model results indicate not only that restrictions on inflows have a short-term impact on restricting portfolio flows, but also suggest that controls on inward portfolio investments have some ability to shift funds from short-term to longer-term markets, though the impact is short-lived.
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Citation |
Asian Development Review, 29(2), p. 136-180
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ISSN |
1996-7241
0116-1105
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Link | |
Publisher |
MIT Press
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Title |
Fine-Tuning an Open Capital Account in a Developing Country: The Indonesian Experience
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Type of document |
Journal Article
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Entity Type |
Publication
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