Managing External Shocks and Domestic Resilience: The Malaysian Experience

Malaysia is one of the most open economies in the world. Structural changes in the economy have largely served to strengthen it's outward orientation. Still Malaysia had to pay a 'price' in the form of vulnerability of its economy to external fluctuations. The article outlines the changing profile of the Malaysian economy, focuses on the transmission of external fluctuations to the domestic economy and discusses the government policy interventions in the wake of uncertain external circumstances. A number of important lessons for other developing countries may be drawn from the Malaysian experience for formulating their own policies and strategies. It shows how the negative effects of economic openness can be minimized through appropriate policy intervention