Financial crisis in Malaysia: did FDI flows contribute to vulnerability?
To date there has been greater awareness that the sudden interruption and reversal of capital flows can cause financial crisis. However for the most part it is thought that the volatility of capital flows applies predominantly to short-term flows and not longer-term capital flows such as FDI. The Malaysian experience of financial crisis challenges the conventional wisdom and has profound implications for other developing countries seeking to attract FDI flows as a source of long-term stable financing. Malaysia succumbed to crisis in spite of the fact that FDI flows accounted for the bulk of financial flows on average. This paper argues that FDI flows in Malaysia contributed to vulnerability to crisis by causing chronic current account deficits and was associated with a slowdown in export growth prior to the crisis. This suggests that when assessing a country's vulnerability to financial crisis, emphasis should not only be placed on the reversibility of flows but also on the macroeconomic impact of these flows. Copyright © 2007 John Wiley & Sons, Ltd.
Volume (Year): 19 (2007)
Issue (Month): 7 ()
|Contact details of provider:|| Web page: http://www3.interscience.wiley.com/journal/5102/home|
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Ajit Singh, 2002.
"Capital account liberalization, free long-term capital flows, financial crises and economic development,"
ESRC Centre for Business Research - Working Papers
wp245, ESRC Centre for Business Research.
- Ajit Singh, 2003. "Capital Account Liberalization, Free Long-Term Capital Flows, Financial Crises and Economic Development," Eastern Economic Journal, Eastern Economic Association, vol. 29(2), pages 191-216, Spring.
- Enzo Grilli, 2002. "The Asian Crisis: Trade Causes and Consequences," The World Economy, Wiley Blackwell, vol. 25(2), pages 177-207, 02.
- Corsetti, G. & Pesenti, P. & Roubini, N., 1998.
"What Caused the Asian Currency and Financial Crisis?,"
343, Banca Italia - Servizio di Studi.
- Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
- Giancarlo Corsetti & Paolo Pesenti & Nouriel Roubini, 1998. "What Caused the Asian Currency and Financial Crisis?," Temi di discussione (Economic working papers) 343, Bank of Italy, Economic Research and International Relations Area.
- Rupa Duttagupta & Antonio Spilimbergo, 2004.
"What Happened to Asian Exports During the Crisis?,"
IMF Staff Papers,
Palgrave Macmillan, vol. 51(1), pages 4.
- Antonio Spilimbergo & Rupa Duttagupta, 2000. "What Happened to Asian Exports During the Crisis?," IMF Working Papers 00/200, International Monetary Fund.
- Duttagupta, Rupa & Spilimbergo, Antonio, 2003. "What Happened to Asian Exports During the Crisis?," CEPR Discussion Papers 4158, C.E.P.R. Discussion Papers.
- Eduardo Fernández-Arias & Ricardo Hausmann, 2000.
"Is FDI a Safer Form of Financing?,"
IDB Publications (Working Papers)
6465, Inter-American Development Bank.
- Christian B. Mulder & Matthieu BussiÃ¨re, 1999. "External Vulnerability in Emerging Market Economies: How High Liquidity Can Offset Weak Fundamentals and the Effects of Contagion," IMF Working Papers 99/88, International Monetary Fund.
- Michael P. Dooley & Eduardo Fernandez-Arias & Kenneth M. Kletzer, 1994. "Recent Private Capital Inflows to Developing Countries: Is the Debt Crisis History?," NBER Working Papers 4792, National Bureau of Economic Research, Inc.
- Tilak Abeysinghe, 2000. "Electronics and growth cycles in Singapore," Applied Economics, Taylor & Francis Journals, vol. 32(13), pages 1657-1663.
- Anita Doraisami, 2004. "Trade Causes of the Asian Crisis: The Malaysian Experience," The World Economy, Wiley Blackwell, vol. 27(5), pages 715-725, 05.
- Jomo, K S, 1998. "Malaysian Debacle: Whose Fault?," Cambridge Journal of Economics, Oxford University Press, vol. 22(6), pages 707-22, November.
When requesting a correction, please mention this item's handle: RePEc:wly:jintdv:v:19:y:2007:i:7:p:949-962. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing)or (Christopher F. Baum)
If references are entirely missing, you can add them using this form.