Open AccessDoes the Mundell-Fleming Model Apply to Malaysia's Output?
Author(s) -
Yu Hsing
Publication year - 2021
Publication title -
rechenschaftsberichte und verkaufsprospekt - deutsche gesellschaft für wertpapiersparen mbh
Language(s) - English
Resource type - Journals
ISSN - 0945-2753
DOI - 10.53384/inbe.101518620035
Subject(s) - economics , exchange rate , monetary economics , fixed exchange rates , inflation (cosmology) , stock (firearms) , value (mathematics) , interest rate , keynesian economics , mathematics , mechanical engineering , statistics , physics , theoretical physics , engineering
Based on an extended Mundell-Fleming model, this paper finds that both fiscal expansion and monetary expansion raise output in Malaysia and that a lower real interest rate, a higher stock value, a lower real oil price and a lower expected inflation rate increase output. Hence, a managed floating system with no predetermined path of the exchange rate adopted by Malaysia may lead to better outcomes than the predictions of the Mundell- Fleming model that fiscal expansion does not raise output under a floating exchange rate but increases output under a fixed exchange rate whereas monetary expansion increases output under a floating exchange rate but does not affect output under a fixed exchange rate (Mankiw, 2019).