UNSPECIFIED. (1991) POVERTY AND MACROECONOMIC POLICY IN MALAYSIA, 1979-87. WORLD DEVELOPMENT, 19 (11). pp. 1615-1632. ISSN 0305-750X

Abstract

Exploring the effects on Malaysia's poor of the early 1980s' recession and the mid-1980s' adjustment, Demery and Demery use an applied general equilibrium model to assess three counterfactual policy packages against the chosen package. The first package assumes an earlier, preemptive adjustment to see whether delaying the decision to accept the economic and political consequences of adjustment made matters worse for poor households. The second assumes milder fiscal restraint, timed with the actual restraint, but a bolder devaluation of the ringgit - to see whether it might have been possible to speed the recovery without increasing the adverse effects on the poor. The third assumes stiffer taxes to raise revenue and correct the public deficits that the milder restraint of the second package could not. Only the third package comes close to achieving the actual outcome, but at the cost of hurting the poor, as happens with the first two packages. The government's chosen policies for cutting and switching expenditures and devaluing the exchange rate thus did much to protect the poor. The slowdown in poverty alleviation in the mid-1980s was the result of the recession, not of the adjustment policies. The government had few alternatives to restore the macroeconomic balances as effectively without making matters even worse for the poor.

Data sourced from Thomson Reuters' Web of Knowledge

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