Capital Mobility in Asia: Causes and Consequences

242 Pages·2017·6.833 MB·English

by  Juthathip Jongwanich

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The ISEAS – Yusof Ishak Institute (formerly Institute of Southeast
Asian Studies) is an autonomous organization established in 1968. It is
a regional centre dedicated to the study of socio-political, security,
and economic trends and developments in Southeast Asia and its
wider geostrategic and economic environment. The Institute’s research
programmes are grouped under Regional Economic Studies (RES),
Regional Strategic and Political Studies (RSPS), and Regional Social
and Cultural Studies (RSCS). The Institute is also home to the ASEAN
Studies Centre (ASC), the Nalanda-Sriwijaya Centre (NSC) and the
Singapore APEC Study Centre.
ISEAS Publishing, an established academic press, has issued more
than 2,000 books and journals. It is the largest scholarly publisher
of research about Southeast Asia from within the region. ISEAS
Publications works with many other academic and trade publishers
and distributors to disseminate important research and analyses from
and about Southeast Asia to the rest of the world.
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First published in Singapore in 2017 by
ISEAS Publishing
30 Heng Mui Keng Terrace
Singapore 119614
E-mail: [email protected]
Website: http://bookshop.iseas.edu.sg
All rights reserved. No part of this publication may be reproduced,
stored in a retrieval system, or transmitted in any form or by any
means, electronic, mechanical, photocopying, recording or otherwise,
without the prior permission of the ISEAS – Yusof Ishak Institute.
© 2017 ISEAS – Yusof Ishak Institute, Singapore
The responsibility for facts and opinions in this publication rests exclusively
with the author and her interpretations do not necessarily reflect the views or
the policy of the publisher or its supporters.
ISEAS Library Cataloguing-in-Publication Data
Jongwanich, Juthathip.
Capital Mobility in Asia : Causes and Consequences.
1. Capital movements—Asia.
HG3891 J79 2017
ISBN 978-981-4786-06-5 (soft cover)
ISBN 978-981-4786-07-2 (E-book PDF)
Typeset by International Typesetters Pte Ltd
Printed in Singapore by Markono Print Media Pte Ltd
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Contents
List of Tables vi
List of Figures vii
Acknowledgements ix
1. Introduction 1
2. Capital Mobility in Emerging Asian Countries 14
3. Determinants of Inward Foreign Direct Investment in 42
Emerging Asian Countries
4. Determinants of Outward Foreign Direct Investment from 68
Emerging Asia
5. Determinants of Non-Foreign Direct Investment 96
Capital Flows
6. Capital Flows and Real Exchange Rates in Emerging 118
Asian Countries
7. Effectiveness of Capital Controls: Evidence from Malaysia 139
and Thailand
8. Conclusions and Policy Inferences 186
Appendix 1: A Chronology of Capital Account Policy in Malaysia, 194
1992–2010
Appendix 2: A Chronology of Capital Account Policy in Thailand, 210
1990–2010
Bibliography 217
Index 225
About the Author 232
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List of Tables
2.1 FDI, Portfolio Investment and Bank Loans in Developing 18
Asia (US$ billion), 1990–2014
2.2 Volatility of Capital Flows, 1990–2014 33
2.3 Foreign Reserves and Financial Indicators, 1999 and 2008/9 35
3.1 Share of Parts and Components in Manufacturing Trade (%) 50
3.2 Share of Parts and Components in World Parts and 51
Components Trade (%)
3.3 Estimation Results 59
4.1 Outward Foreign Direct Investment (US$ billion) 68
4.2 Financial Development Indicators in Emerging Asian 75
Economies (% of GDP)
4.3 Public and Corporate Bonds Outstanding in Emerging 76
Asian Economies (% of GDP)
4.4 Estimation Results 83
4.5 Selected Estimation Results (alternative measures of 84
financial development)
4.6 Selected Estimation Results 88
5.1 Estimation Results on Capital Inflows 104
5.2 Estimation Results on Capital Outflows 108
A.5.1 Full Estimation Results on Capital Inflows 112
A.5.2 Full Estimation Results on Capital Outflows 115
6.1 Estimation Results 130
6.2 Real Exchange Rate Coefficients in Selected Asian Countries 134
7.1 Capital Policy Indexes Conducted 154
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List of Figures
1.1 Capital Flows to/from Developing Asia, 1990–2014 2
1.2 Composition of Capital Inflows in Developing Asia, 3
1990–2014
2.1 Capital Flows to/from Developing Asia, 1990–2014 15
2.2 Capital Flows to/from Developing Asia, Disaggregated 17
by Type of Capital, 1990–2014
2.3 Scores of Financial Openness, 1995–2013 22
2.4 Current Account Balance, Net Capital Flows and Foreign 23
Reserves, 1990–2014
2.5 Composition of Capital Inflows in Developing Asia, 25
1990–2014
2.6 Stock Prices in Developing Asia and G3 Countries 26
(2000=100)
2.7 Portfolio Share in Asia, 2001–14 27
2.8 Cross-border Mergers and Acquisitions in Developing 29
Asia, 1990–2014
2.9 Nominal Exchange Rates, 1997–99 and 2007–14 36
2.10 Composition of Capital Outflows in Developing Asia, 38
1990–2014
3.1 Inward Foreign Direct Investment in Emerging Asian 43
Countries, 1990–2014
3.2 Share of Parts and Components in Manufacturing Trade (%) 43
4.1 Outward Foreign Direct Investment from Emerging 69
Asian Countries, 1990–2015
4.2 Share of M&A Purchases and Outward Greenfield 70
Investment, 2003–15 (%)
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viii Capital Mobility in Asia: Causes and Consequences
5.1 Non-FDI Capital Flows to/from Developing Asia, 97
1990–2014
5.2 Ratio of Investments to Savings in Selected Asian 106
Countries, 1990–2014
6.1 Real Exchange Rates in Selected Asian Countries, 119
2000–15 (2005=100)
7.1 Capital Account Policy Indexes (Liability Side) of 156
Malaysia, 1990–2010
7.2 Capital Account Policy Indexes (Asset Side, 157
Outflow Policy) of Malaysia, 1990–2010
7.3 Capital Account Policy Indexes (Liability Side) of 158
Thailand, 1990–2010
7.4 Capital Account Policy Indexes (Asset Side) of Thailand, 159
1990–2010
7.5 Selected Impulse Responses of Key Variables to Capital 167
Account Policies (Net Capital Inflows: Liability Side) in
Malaysia, 1990–99
7.6 Selected Impulse Responses of Key Variables to Capital 170
Account Policies (Net Capital Inflows: Liability Side),
2000–10
7.7 Impulse Responses of Key Variables to Capital Account 171
Policies (Net Capital Outflows: Asset Side), 2000–10
7.8 Selected Impulse Responses of Key Variables to Capital 174
Account Policies (Liability Side) in Thailand, 1993–99
7.9 Selected Impulse Responses of Key Variables to Capital 177
Account Policies (Liability Side), 2000–10
7.10 Impulse Responses of Key Variables to Capital Account 180
Policies (Asset Side), 2000–10
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Acknowledgements
The author wishes to record deep thanks to the ISEAS manuscript
committee, especially to the two anonymous reviewers for their
suggestions on my manuscript. Deep appreciation, too, goes to
Prof. Hal Hill, Prof. Jong-Wha Lee, Prof. David Vines and
Dr Muhamad Chatib Basri for their time to review my book. Last
but not least, I would like to give special thanks to the ISEAS’s
editorial team, especially Ms Sheryl Sin Bing Peng, for the efficient
and helpful work.
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