Growth, Inequality and Development in the Aftermath of the Great Recession
Edited by Hasan Cömert and Rex A. McKenzie
Chapter 7: The global financial crisis: impact and response from Malaysia
The economic crisis of 2008 had its origins in the United States and subsequently affected the economies of developed countries, including the European Union, Japan and Singapore. These developments had a tremendous impact on the Malaysian economy. This article argues that, because of its size and openness, Malaysia was severely affected by the crisis through trade and financial channels. The instabilities in foreign markets led to poor demand for Malaysian exports. This led to a decline in Malaysian output and thus to labor market shocks, leading to retrenchments throughout the economy. The severity of the crisis suggests that Malaysia should not be unduly reliant on export led growth.
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