Date of Award

1-1-2000

Thesis Type

Masters

Document Type

Thesis

Divisions

Faculty of Business and Economics

Department

-

Institution

Universiti Malaya

Abstract

The latest financial and currency crisis that struck Malaysia in 1997 has exposed several macroeconomic weaknesses within the Malaysian economy, in light of the huge influx of international capital flows and speculative activities, and highlighted once again the issue of premature capital account and financial liberalization. These weaknesses such as economic growth well above potential output, loss of efficiency in the economy, current account deficits, over dependence on the banking sector for loans, which were later used for unproductive investments such as those in the stock and property markets have made Malaysia vulnerable to the shocks that emanated from the recent crisis. As a response, the Malaysian authorities undertook several macroeconomic measures including the imposition of the selective capital and exchange controls and the Ringgit peg. With a right mixture of monetary and fiscal policies, and the effectiveness of these controls, Malaysia was able to sustain its economic recovery program, which has since showed positive results. Nonetheless, the debate over the controls effectiveness on certain aspects of the economy remained debatable. Since the controls and the Ringgit peg are deemed to be temporary, planning for an exit requires a careful consideration and several issues need to be addressed before such an exit is attempted. The issues comprise of the selection of an appropriate anchor for the monetary policy, improving corporate governance, transparency, accountability and responsibility within the public, financial and private sectors, maintaining the current restrictions on offshore market transactions, promoting and using regional cooperation like the Association of South East Asian Countries in order to check on speculative activities. The selection of an exchange rate regime should then be made based on its long-term performance and not on the basis of any short-term scenario. lt is how one manages a currency regime that counts rather than which regime to adopt Hopefully, by implementing these measures Malaysia may be able to withstand and minimize its losses in the next round of similar crises.

Initial

snms

Additional Information

Dissertation (M.A) -- Faculty of Business and Economics, Universiti Malaya, 2001.

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