The IMF Working Papers series is designed to make IMF staff research available to a wide audience. Almost 300 Working Papers are released each year, covering a wide range of theoretical and analytical topics, including balance of payments, monetary and fiscal issues, global liquidity, and national and international economic developments.
Natalia Tamirisa, Simon Johnson, Kalpana Kochhar, and Todd Mitton
INTERNATIONAL MONETARY FUND
We analyze the capital controls imposed in Malaysia in September 1998. In macroeconomic terms, these controls neither yielded major benefits nor were costly. At the same time, the stock market interpreted the capital controls (and associated events) as favoring firms with stronger political connections, and some connected firms reportedly received advantages immediately following the crisis. Analysis of financial accounts indicates that connected firms outperformed unconnected firms before the 1997-98 crisis but not afterward. After the crisis, connected firms were either not supported as much as the market had expected or the benefits they received were not manifest in their published accounts.