Impacts of Capital Account Liberalization on Economic Growth

This thesis aims to investigate the policy programs of capital account liberalization in Thailand and Malaysia and their impacts on economic growth in both countries. The study covers the year 1975-2005, divided into three periods: before (1975-1996), during (1997-1998) and after (1999-2005) the Asian financial crisis. It was found that Thailand imposed policy programs that moved toward more liberalization than Malaysia , and the impacts of the liberalization on Thai economy were greater. Capital account liberalization entailed positive and negative impacts to Thai and Malaysian economies. In the positive side, economic growth was enhanced by the reduction of cost of capital, investment boom and increase in financial depth as a result of the liberalization. In the negative side, the liberalization disturbed macroeconomic stability. It led to large current account deficit and sharp expansion of domestic credit that they reversed in the wake of crises.