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Sustainability of external imbalances: The case of Malaysia


Citation

Lau, Evan and Baharumshah, Ahmad Zubaidi (2003) Sustainability of external imbalances: The case of Malaysia. Singapore Economic Review, 48 (1). pp. 61-80. ISSN 0217-5908; eISSN: 0217-5908

Abstract

The understanding of the sustainable external imbalances over the 1961-2001 for Malaysia is presented in this paper. The empirical results clearly show that inflows and outflows share a common stochastic trend prior to the 1997 Asian crisis while in the post-crisis period the current account surpluses are on an unsustainable path. Our findings highlight the important role of imports (mainly intermediate inputs) in exports. For an economy that depends on export promotion for its growth process, imports are important in restoring external imbalances to its sustainable steady state path. As illustrated by the recent crisis, the large depreciation of the ringgit contributed to a decline in imports and for an economy that is highly dependent on imported capital, this means an economic slowdown.


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Additional Metadata

Item Type: Article
Divisions: Faculty of Economics and Management
DOI Number: https://doi.org/10.1142/S0217590803000591
Publisher: World Scientific
Keywords: Current account deficits; Intertemporal budget constraint; Malaysia; Sustainability
Depositing User: Ms. Azian Edawati Zakaria
Date Deposited: 29 Jul 2025 03:43
Last Modified: 29 Jul 2025 03:43
Altmetrics: http://www.altmetric.com/details.php?domain=psasir.upm.edu.my&doi=10.1142/S0217590803000591
URI: http://psasir.upm.edu.my/id/eprint/118899
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