Question
There are several ways to avoid emerging market crises. One way is to impose currency controls as Malaysia did after the Asian crisis of 1997.
There are several ways to avoid emerging market crises. One way is to impose currency controls as Malaysia did after the Asian crisis of 1997. Some economists have advocated abandoning free capital movement as a means of insulating a nations currency from speculative attacks. However, open capital markets improve economic welfare by channeling savings to where they are most productive. Should a relatively small country impose currency controls or should it permit currencies to float freely? What are the pros and the cons of currency controls in emerging markets?
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