The Malaysian economy during three crises

Abstract

The purpose of this chapter is to analyse the experiences and macroeconomic policies of post-Independence Malaysia during three periods in which the economy was subjected to major shocks: 1985-86, 1997-98 and 2008-2010. For each "crisis episode", the chapter examines the sources of vulnerability to the external shock, the domestic economic impact, the policy response and the recovery process. The three episodes reveal striking contrasts in terms of the nature and origin of each shock, the policy response to it and the global economic environment that underpinned the recovery process. A comparative study of these crises therefore holds lessons of broad relevance for macro economic policy making in Malaysia and other developing countries.