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Introduction to Macroeconomics
Zaid A. Al-Shammari
201100213
Dr. Saif
Assigment#2
Exchange rate
The Malaysian dollar was hanged to the pound earlier than 1972. The United Kingdom successfully brings down the
pound and to stay away from the decline of the Malaysian dollar on 1972, Malaysia decided to hang the Malaysian
dollar to the US$. Earlier 1970s due to the failing of the US dollar, the dismantling of the Sterling Area in 1972, and
the heavy inflow of funds into Malaysia in May and June 1973, Malaysia adopted a managed floating exchange rate
system on June 21, 1973 (Saleh (1987), pp. 41-50). Because of the depreciation of the ringgit1 against the US$ and
following the example of many other countries, Malaysia adopted a “dirty float” exchange rate system on 1975 and
from August 1975, Malaysia’s currency has been hanged to a compound of currencies.
Between 1975 and 1979, Malaysia approves the expansion of monetary and fiscal policies aimed as be assisting and
supporting economic growth and price constancy. However,between 1980 and 1982, the majority industrial countries
were fixed in a severe recessions. That is approves that the Malaysia economy expansion goes down slowly regardless
of monetary and fiscal policy. Between 1988 and 1944 the external demand was strengthen greatly in this period and
the government obtains more to the monetary policy. Monetary policy was concentrate with needs supporting the
country’s economic recovery by maintain price constancy.
Business cycle
The business cycle was unstable for Malaysia economy however it is shifted to the facial point for study. There are a
lot of researches study the relation between size and variable unstable of major economic and they call it economic
fluctuating.
The relationship between the major economic of the real GPD was from 1975 to 2002. During those years, Malaysia
has 3 major disasters (namely commodity, electronic and financial). After that Malaysia economic growth positively
to achieve the average GDP growth by 6 % for inflation and less than 4% unemployment. However, the Malaysia
economy was unstable
Consumer spending patterns
Consumer Spending in Malaysia increased up to 99812 MYR Million in the 3rd quarter of 2012 from 92693 MYR
Million in the 2nd quarter of 2012. The Department of Statistics reported that the Consumer Spending in
Malaysia,previously, from 2005 until 2012, Malaysia Consumer Spending averaged 76903.2 MYR Million success an
all the time high of 99812.0 MYR Million in AUG of 2012 and it is record low of 56768.0 MYR Million in May of
2005.
Investment patterns
the main thing in the investment patterns is the FDI ( Foreign Direct Investment For the past two decade, Malaysia
was receiving a lot FDI. FDI stock in Malaysia starts to grow up slowly by 1970s. FDI inflows had increased almost
twenty-fold during 1970s to 1990s, from $94 million dollar in 1970s to $2.6 billion dollar by 1990s, although there
was some fluctuation between the years. Even though the FDI was increased over the year, however, since the early of
1990s, there have been several periods of slowdown. In 1993, FDI drop drastically dropped drastically due to a
slowdown in investments from two main sources of investments for Malaysia - Japan and Taiwan. One of the main
reasons for this slowdown is the rise in wage rates in Malaysia relative to other Asian countries (such as China,
Vietnam and Indonesia). The total FDI flows in Malaysia was peaked at 1996, when it achieve $7.3 billion dollar. The
financial crisis of 1997 that affected most of the Southeast Asia also serves to reduce FDI into Malaysia. Since the
early of 2000s, the FDI flows in Malaysia tend to inconsistent and fluctuate randomly, however it also achieve an
average inflows of US $3billion per year.
In general, Malaysia is the second fastest growing economy in the South East Asian region with an average Gross
National Product (GNP) growth of eight-plus percent per year in the last seven years. Since independence in 1957,
Malaysia has moved from an agriculturally based economy to a more diversified and export oriented one. The
Malaysian market is fairly openly oriented, with tariffs only averaging approximately fifteen percent and almost nonexistent non-tariff barriers and foreign exchange controls. With a stable political environment, increasing per capita
income, and the potential for regional integration throughout the Association of South East Asian Nations (ASEAN),
Malaysia is an attractive prospect for FDI.