External Shocks in Emerging Markets: The Case of Malaysia

Shariff Umar Shariff Abd. Kadir and Wong, Hock Tsen (2023) External Shocks in Emerging Markets: The Case of Malaysia. Labuan E-Journal of Muamalat and Society (LJMS), 17. pp. 11-23. ISSN 1985-482X

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Global integration has resulted in numerous benefits, including increased trade, investment, and economic growth. Meanwhile, integration can make countries more vulnerable to external shocks, such as commodity price fluctuations, or economic and financial crises. These have the potential to significantly affect economic activity. Thus, the present paper investigates the impact of external shock in Malaysia using the open economy SVAR model. The findings discovered that external shocks cause inflationary pressures in the domestic economy. Domestic monetary policy seems to be tightening to reduce inflationary pressures. Shocks in oil prices and foreign monetary policy cause a decrease in the government debt ratio, demonstrating that both external variables have a significant impact on the domestic debt ratio. External shocks, particularly oil prices and foreign income shocks stimulate output and improve the primary deficit. The findings indicate that external shocks have a significant impact on the Malaysian economy.

Item Type: Article
Keyword: External shocks, Malaysia and SVAR model
Subjects: H Social Sciences > HB Economic theory. Demography > HB1-3840 Economic theory. Demography
H Social Sciences > HC Economic history and conditions > HC10-1085 Economic history and conditions > HC94-1085 By region or country
Department: FACULTY > Labuan Faculty of International Finance
Date Deposited: 02 Oct 2023 15:08
Last Modified: 02 Oct 2023 15:08
URI: https://eprints.ums.edu.my/id/eprint/37440

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