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The Role of Macroeconomic Fundamentals in Malaysian Post Recession Growth

  • Lee Chin
Chapter

Abstract

Before the currency crisis, Malaysia was considered the best “development success story” among the second-tier newly industrializing economies in East Asia. From 1987 to 1996, the Malaysian economy grew at an average annual rate of 9 %, several times faster than the economies of the USA and many other Western industrialized nations. The economy was virtually at full employment for the last 6 years before the crisis, with modest inflation, rapid export growth, manageable external debt, and improvement in current account deficits. However, this impressive growth changed dramatically with the onset of the currency crisis. Economic growth contracted in 1998. Nevertheless, the economy showed some recovery, with an economic growth rate of 3–4 % for 1999–2001. The Malaysian government has made much effort to help the economy recover, such as a monetary policy that aims to promote monetary stability and sufficient liquidity in the economy, keeping inflation rates low, and maintaining the exchange rate at a stable level owing to the pegging to the US dollar. The external sector also had a good surplus, and the stock market has performed steadily in the past several years. As a result, Malaysian real GDP grew at an accelerated pace of 6–8 % from 2003 to 2010. It is the aim of this study to find out the role of macroeconomic fundamentals in Malaysian postrecession growth. The macroeconomic variables selected are exports, imports, price level, money supply, interest rate, exchange rate, and government expenditure.

Keywords

Exchange Rate Interest Rate Foreign Direct Investment Monetary Policy Granger Causality 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer India Pvt. Ltd. 2013

Authors and Affiliations

  1. 1.Department of EconomicsUniversiti Putra MalaysiaSerdangMalaysia

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