Macroeconomic adjustment and the real exchange rate: implications for growth of the manufacturing sector in Malaysia

Abstract

This paper analyses the role of the real exchange rate in the macroeconomic adjustment process during the period 1980 to 1991 and draws implications rate on the from the swing in the real exchange development of the manufacturing sector in Malaysia. For the paper, the two fiscal I will divide of this purpose macroeconomic development of the country into phases: From 1980 to 1985, where the macroeconomic imbalance was dominated by the public sector deficit, with the attendant appreciation of the real exchange rate. Beginning from 1986, the real exchange rate depreciated continuously until 1990, with current account of the balance of payment registering a surplus from 1987 to 1988 and then reversing back into deficit from 1989 with the emergence of imbalance between the private sector saving and investment.