The intertemporal approach to the current account: Evidence from Indonesia and Malaysia

The study presents the empirical analysis of the current account positions of two ASEAN countries (namely, Indonesia and Malaysia) during the past four decades. We address the issue of external solvency by measuring the deviation of actual from the optimal path of the current account balance using Sachs’s (1982) intertemporal model. Of these two countries, our results show that the model performed noticeable better for Malaysia. We found that the Malaysia’s actual path moves closely to the estimated consumption-smooth currents accounts, with small (insignificant) deviations between them. Unlike Malaysia, we found weaker support of the model for the case of Indonesia. Indonesia’s external imbalances reveal the following: (i) the deficits of the mid 1980s and 1990s prior to 1997 financial crisis appear to be unsustainable; (ii) the evidence appears to be broadly consistent with the intertemporal model and hence suggests that capital is mobile; (iii) the large surpluses observed during the post-1997 period significantly deviate from the optimal path, implying that savings have reached a level that is beyond what would be required to support full consumption smoothing;and (iv) there is excessive volatility in international capital movements for consumption-smoothing purpose

The Behaviour Of The Current Account Balances Of ASEAN-5 Members

Current account conveys information about the actions and expectations of all market participants in an open economy; it reflects the stance of macroeconomic policies and provides information about the behaviour of economic agents. Therefore, the needs for greater understanding about the behaviour of the current account are becoming increasingly vital, as institutional structures dealing with macroeconomic policies cannot simply be copied from one country to another. This dissertation empirically examined the movement of the current account balances for the ASEAN-5 countries, namely Indonesia, Malaysia, Philippines, Singapore and Thailand, under four main issues: the intertemporal optimization approach to the current account, the twin-deficits hypothesis, the relationship between current account and investment, and the temporary and permanent shocks of the current account balance and the real exchange rate. Several important results emerged from this study. First, the present value model effectively captures the magnitudes and directions of the current account balances for four out of five ASEAN-5 countries over the period of the study, thus favored the proposition that the countries’ expectations about future movement in net output are reflected by today’s current account. Second, the data supported the twin deficit hypothesis for the ASEAN-5 countries except Indonesia, and that the budget deficit plays a weakly exogenous role with respect to the current account deficit. This is an important finding because it implies that fiscal policy is effective in influencing current account balance. Third, our finding indicated that the ASEAN-5 have relied on domestic savings to finance their investment, thus agreeing with the proposition that developing countries only participate partially in the world’s capital market, as a result of the lack of sophisticated domestic capital market in the developing countries. Forth, our finding suggested that the temporary shock depreciates the currency so much that the current account improves over the short term, while over the longer term, the current account effect fades away as the exchange rates stabilize

Intertemporal approach to the current account: evidence from Malaysia and Indonesia

This article presents an application of the intertemporal approach to the current account positions of Indonesia and Malaysia over the past four decades. Comparing the results for these two emerging market economies, the model performed noticeable better for Malaysia. Meanwhile, Indonesia’s external imbalances revealed the followings: deficits of the mid-1980s and 1990s prior to the 1997 crisis appeared to be an unsustainable path; surpluses during the post-crisis period deviated from the ‘optimal path’ significantly, implying that savings had reached a level that was beyond what would be required to support full ‘consumption-smoothing’; and capital movements appeared to be excessively volatile

Teaching Science and Mathematics in English Steering Mastery in English Language Amongst Sciences Students in UKM

AbstractThis study was conducted to ascertain teaching Science and Mathematics in English will enhance English proficiency amongst the science stream students in UKM. The study found that the students agreed that the teaching of Science and Mathematics in English can improve their English proficiency. The results showed that teaching Science and Mathematics in English is capable of being a driven force in mastering basic English language and communication, and also in improving the explanation of the concept of Science and Mathematics in English

Students’ Inclination towards English Language as Medium of Instruction in the Teaching of Science and Mathematics

AbstractMalay language, the national language of Malaysia has been the medium of instruction for Science and Mathematics for the past four and a half decades in Malaysia. The government however changed the medium of instruction of these subjects to English in January 2003. The “Teaching and Learning of Science and Mathematics in English” (PPSMI) policy was implemented in all primary and secondary schools. It aims to improve the English language proficiency among students as well as the learning and achievement level in science and mathematics. This paper presents findings of the study on students’ inclination towards English language as medium of instruction in teaching and learning of Science and Mathematics in Higher Learning Institutions in Malaysia. The respondents were 291 undergraduate students from the Faculty of Science and Technology (FST) and Faculty of Education (FPEND) of Universiti Kebangsaan Malaysia (UKM). A questionnaire pertaining to students’ inclination was used as research instrument. Using descriptive statistics, ANOVA and t-test, the study found that undergraduate students of FST and FPEND had an inclination towards English as medium of instruction in the teaching and learning of Science and Mathematics. Using the Post-Hoc test, it is found that Indian students and students from other races than Malay and Chinese have greater inclination towards English as medium of instruction in teaching and learning of Science and Mathematics in UKM for both faculties. However, FST students who studied in Mandarin and Tamil at pre-university level (STPM) had higher inclination compared to those who used Malay language or even English

The Beveridge-Nelson decomposition of economic time series: some observations on four ASEAN countries

The primary objective of this study is to experiment with a procedure in implementing the Beveridge-Nelson decomposition. In particular, we apply the Arino-Newbold procedure to obtain the transitory components of several economic aggregates of four ASEAN countries, namely Indonesia, Malaysia, Thailand and Singapore. The results are then compared with some stylized facts about these variables. On the overall, the technique produces consistent result

Hubungan ko-kamiran dan kesebaban jangka pendek di antara pasaran saham dengan pemboleh ubah makroekonomi: meneliti data Malaysia

Dalam kajian ini, hubungan di antara beberapa pemboleh ubah makroekonomi (harga emas, harga minyak mentah, harga minyak sawit mentah dan kadar pertukaran ringgit Malaysia dengan dolar US) dengan pasaran saham Malaysia dianalisis. Analisis dilaksanakan dengan menggunakan pendekatan vektor pembetulan ralat. Hasil daripada penganggaran model vektor pembetulan ralat menunjukkan bahawa wujud hubungan kesebaban jangka pendek sehala yang bererti antara harga minyak mentah dengan indeks komposit Bursa Malaysia

Evidence of purchasing power parity from Asean data (Kewujudan pariti kuasa beli daripada data negara-negara Asean)

Purchasing power parity (PPP) is a theory of long-term equilibrium exchange rates based on relative price levels of two countries. The concept is based on the law of one price; the idea that in the absence of transaction costs, identical goods will have the same price in different markets. PPP exchange rate (the "real exchange rate") fluctuations are mostly due to different rates of inflation between the two economies. Aside from this volatility, consistent deviations of the market and PPP exchange rates are observed. In this study, the PPP hypothesis is examined on a sample of six ASEAN members, namely Indonesia, Malaysia, Myanmar, Philippine, Singapore and Thailand. Specifically, the paper discusses the restricted model for PPP, and briefly describes the derivation of PPP models in cointegrating form and in dynamic error-correction (DECM) form. The results are mixed; the cointegration approach seems to have some advantage over the DECM approach. Nevertheless, assuming that the results fairly represent the ASEAN economies, the evidence in favor of PPP is an early indication of the integration in financial and goods markets within the South-East Asia region

Intertemporal approach to the current account: evidence from Malaysia and Indonesia

This article presents an application of the intertemporal approach to the current account positions of Indonesia and Malaysia over the past four decades. Comparing the results for these two emerging market economies, the model performed noticeable better for Malaysia. Meanwhile, Indonesia’s external imbalances revealed the followings: deficits of the mid-1980s and 1990s prior to the 1997 crisis appeared to be an unsustainable path; surpluses during the post-crisis period deviated from the ‘optimal path’ significantly, implying that savings had reached a level that was beyond what would be required to support full ‘consumption-smoothing’; and capital movements appeared to be excessively volatile