This paper uses the term, capital management techniques, to refer to two complementary (and often overlapping) types of financial policies: policies that govern international private capital flows and those that enforce prudential management of domestic financial institutions. While management of inflows has recently gained some respectability, those affecting capital outflows, especially if they are in place for long periods of time, are still very controversial.

This paper presents case studies of the capital management techniques employed in India, China, and Malaysia, three countries that managed capital outflows during the 1990s. The cases reveal that policymakers were able to use capital management techniques to achieve critical macroeconomic objectives.

These included the prevention of maturity and locational mismatch; attraction of favored forms of foreign investment; reduction in overall financial fragility, currency risk, and speculative pressures in the economy; insulation from the contagion effects of financial crises; and enhancement of the autonomy of economic and social policy. The paper examines the structural factors that contributed to these achievements, and also weighs the costs associated with these measures against their macroeconomic benefits.