Goh, Soo Khoon (2009): Managing the Impossible Trinity: The Case of Malaysia. Published in: CenPRIS Working Paper Series , Vol. 9, No. 109 (August 2009)
Download (203kB) | Preview
This paper discusses how Malaysia manages the impossible trinity, the conjecture that a country cannot simultaneously maintain an open capital account, an exchange rate stability and monetary policy independence. Only two out of these three goals can be mutually consistent and policy makers have to decide which third goal to give up. The paper shows how Malaysia adopts an intermediate regime -- a regime that enables policy makers to manage all the three goals simultaneously. The impact of the global financial crisis on the Malaysian economy and the policy options for Malaysia to deal with the recent huge capital outflows are discussed in this paper. The willingness by Bank Negara Malaysia to allow a certain extent of exchange rate adjustments in the face of current global crisis reflects that Malaysia is not exempted from the impossible trinity
|Item Type:||MPRA Paper|
|Original Title:||Managing the Impossible Trinity: The Case of Malaysia|
|English Title:||Managing the Impossible Trinity: The Case of Malaysia|
|Keywords:||Impossible Trinity, Malaysia, Global Financial Crisis|
|Subjects:||F - International Economics > F4 - Macroeconomic Aspects of International Trade and Finance > F41 - Open Economy Macroeconomics|
|Depositing User:||soo khoon goh|
|Date Deposited:||26. Oct 2009 09:25|
|Last Modified:||12. Feb 2013 01:58|
Ariff, M.K. (2005). The Ringgit’s New-Found Freedom. MIER, http://www.mier.org.my/newsarticles/archives pdf/drariff1_8_2005.pdf
Athukorala, P. Crisis and Recovery in Malaysia : The Role of Capital Controls. Cheltenham: Edward Elgar, 2001.
Bank Negara Malaysia, 1999. The Central Bank and The Financial System in Malaysia- A Decade of Change. Kuala Lumpur: Bank Negara Malaysia.
Bank Negara Malaysia, 2005. “Annual Report 2005”, Bank Negara Malaysia: Kuala Lumpur.
Bank Negara Malaysia, 2007. “Annual Report 2007”, Bank Negara Malaysia: Kuala Lumpur.
Eichengreen, B. (1994). International Monetary Arrangement for the 21st Century, Washington, DC: Brookings Institution.
Frankel, J. (1999). “No Single Currency Regime is right for all countries at all times” Essay in International Finance 215, International Finance Section, Princeton University
Hashimoto, Y. (2008). “Too Much for Self-Insurance? Asian Foreign Reserves”, Hong Kong Institute for Monetary Research Working Papers, 06/2008.
Hannoun, H. 2007. “Policy response to the challenges posed by capital inflows in Asia”, speech for the 42nd SEACEN Governors’ Conference, Bangkok, 28 July 2007.
James, W.E., Park.D., Jha, S., Jongwanich, J., Hagiwara, A.T. and Sumulong, L., 2008. “ The US Financial Crisis, Global Financial Turmoil, and Developing Asia: Is the Era of High Growth at an end?” ADB Economics Working Paper Series No.139.
Joshi, V. 2003. “ India and the Impossible Trinity” , The World Economy, Vol 26, 4(04), p.555 – 583.
Khor, M. (2008). South Should Prepare to Counter Effects of Global Finance Crisis, http://www.twnside.org.sg/title2/finance/twninfofinance20080801.htm
Latifah, M.C. 2005. Globalization and the operation of monetary policy in Malaysia. BIS Papers, No.23, Bank for International Settlements.
Masih, A.M. 2005. “ Macroeconomic Policy Trilemma in Open Economies: Which Policy Option is Ideally Suited to the Malaysian Context?, Jurnal Pengurusan, Vol.24, p.3-26.
Obstfeld, M., Shambaugh, J. & Taylor, A., 2004. “ Monetary Sovereignty, Exchange rates, and Capital Controls: The Trilemma in the Interwar Period”, National Bureau of Economic Research, Working Paper #10393.
Obstfeld, M., Shambaugh, J. & Taylor, A., 2004(a). “The Trilemma in History: Tradeoffs Among Exchange Rates, Monetary Policies, and Capital Mobility” National Bureau of Economic Research, Working Paper #10396.
Olivier, J. 2007. “International Reserves in Emerging Market Countries: too much of a good thing?”, Brookings Papers on Economic Activity, Vol.1, pp.1-55.
Ooi, S.K. 2008. “Capital flows and financial assets in emerging markets: determinants, consequences and challenges for central banks: the Malaysian experience”, BIS Papers No.44, Bank for International Settlements
Sukhdave, S. 2008. “Exchange rate management in uncertain times”, MIER National Economic Outlook Conference 2009 -2010, Hilton Hotel Kuala Lumpur, 2-3 December 2008
Yusof, Z.A., Hussin, A.A., Alowi, I., Lim, C. and Singh, S., 1994. Financial Reform in Malaysia, in: Caprio, G., Atiyas, I., Hanson, J.A. (Eds.), Financial Reform: Theory and Experience, Cambridge University Press, UK, pp. 276-320.