Global Shocks and the Growth Constraints in the Malaysian Economy 1970-2012
A structural dynamic model is developed to assess Malaysia’s external and internal constraints prior to the East Asian crisis. The model computes the resource requirement to move the economy to a more sustainable form of development. In addition, we examine how the 2008 global financial crisis affected economic performance. The calibrated results clearly show the trade-off between the rate of investment and economic growth under the fiscal and foreign exchange constraints. Our results also highlight the importance of the external trade and FDI to achieve a modest growth.
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* The picture becomes pessimistic if we look at capital outflow from the capital market, and to cite previous prime Minster of Malaysia Dr. Mahathir, “the stock market was wiped out of more than US$ 100 billion in 1998 and the KLSE market capitalization fell by 76 percent”.
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