This chapter questions whether the Malaysian capital controls of September 1998 were effective. It suggests that there is no conclusive evidence that the September 1998 controls were successful, but also argues that there is no evidence that they caused much harm to the Malaysian economy either. The controls were introduced 14 months after the crisis began, and they were too late in averting the crisis, or in retaining the bulk of foreign funds that had fled by then.

The paper also notes that Malaysia was the only East Asian crisis economy to run a budget surplus in 1997, while those with IMF programmes all ran budget deficits. Finally, it suggests that prudential banking regulations introduced after the last banking crisis in the late 1980s prevented Malaysia from being more vulnerable to crisis, but official encouragement of portfolio investment inflows into its stock market was the main source of its vulnerability.