Within three days of South Korea imposing currency controls, Indonesia (a member of G-20) unveiled several policy measures to regulate potentially destabilizing capital flows. The policy announcement by Indonesia is the latest initiative by emerging markets to tame speculative money which could pose a threat to their economies and financial systems.

On June 16, 2010, Bank Indonesia, country’s central bank, announced the following policy measures:

1. To make short-term investments less attractive, there will be a one-month minimum holding period on Sertifikat Bank Indonesia (SBIs) with effect from July 7,…

On June 13, 2010, South Korea announced a series of currency controls to protect its economy from external shocks. The new currency controls are much wider in scope than foreign exchange liquidity controls announced earlier in 2009.

The imposition of currency controls by the Korean authorities has to be analyzed against the backdrop of the global financial crisis. Despite its strong economic fundamentals, South Korea witnessed sudden and large capital outflows due to deleveraging during the global financial crisis. It has been reported…