The role of capital flows and how they are managed have been controversial issues for ASEAN+3 emerging market economies since the Asian financial crisis. The region has been a recipient of increasingly large capital inflows over the past two decades amid intensifying financial globalization. However, it has also been exposed to sudden stops and reversals in capital flows, with attendant spillovers and contagion. Two key international frameworks on the liberalization of capital flows and their management have been published by the OECD and the IMF. Although ASEAN+3 members acknowledge that international positions on CFMs and MPMs have evolved over time, they argue that there is a need to better understand the applications vis-à-vis country-specific circumstances. This paper assesses whether the use of capital flow management and/or macroprudential policy measures may be justified for the ASEAN+3 region, and develops a “regional position” on their use.

Authors: Laura Grace Gabriella, Li Lian Ong, Siu Fung (Matthew) Yiu