Estimating Malaysia's output gap: Have we closed the gap?

The concepts of potential output and output gap are central to the policymakers’ analytical work in providing guidance to policy decisions. This paper presents three different estimation approaches for the Malaysian economy, namely, the univariate, multivariate and structural models. While the multivariate and structural models are mainly underpinned by theory and captured the concept of potential output better, most policymakers still maintain a suite of models to preserve diversity. Diversity provides a greater scope for cross-checking the robustness of results. The paper attempts to contribute by first, providing a critical assessment of the different models in estimating potential output and the output gap, and, second, the usefulness of each models in terms of assessing the drivers of future potential output, predicting price trends and identifying sources of inflation in the economy

The Impact Of Corporations Excess Saving Behavior And Macroeconomic Policies On Poverty Incidence: Empirical Analysis Of Indonesia, Philippines And Thailand

The period since the 1997 Asian Financial Crisis has witnessed many reforms in the economic structure and financial landscape in Asian economies that have increasingly influenced the global economy and financial discourse. The extents of these reforms not only involve macroeconomic policies but most importantly affect the behavior of economic agents and have challenged traditional economic assumptions and fundamentals. The first chapter analyzes the issue of a savings glut that arose due to the claim that corporations hoard cash after the 1997 Asian Crisis. The savings behavior that the corporations exhibited went against the conventional economic theory that firms are supposed to invest in productive sectors to generate employment and increase labor force participation. This unfortunately wasn't the case because firms turned to alternative investments in financial markets that caused negative repercussions on social welfare especially by adversely affecting the incidence of poverty. Based on these findings, we proceed with the second chapter using historical data and a financial computable general equilibrium (FCGE) model to examine the economy-wide impact of fiscal and monetary policies, and in particular, the impact on poverty and the income of the bottom 20% of the population in Thailand. The argument that expansionary policies will improve the income distribution is reconsidered and the model reveals that this is not necessarily the case. Finally, the third chapter draws an example from a group of lower income households in the rural area of Lombok that have successfully and independently improved their financial conditions and welfare and were not adversely affected by the investment behavior of corporations or the economic policies of the government and central bank. Their sustainable growth for more than two decades provides hope and it shed lights on the possibility for the poor to survive and improve their well-being without depending on subsidies or external funding