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International Journal of Management Studies (IJMS) Vol. 17, Special Issue, February 2010

KEYNOTE SPEECH
The Current Global Crisis: The Perils Of Economic Globalisation
Mahani Zainal Abidin
Institute of Strategic and International Studies (ISIS)
 
The basic foundation of this crisis actually lies with the global economic system which is based on the globalisation of the economyand financial systems. That is the foundation of the current problem.However, if we actually look at the system, this crisis is not abouta specific country or specific factor. It is actually about the globalsystem which is based on the economic globalisation system. Thequestion that comes to mind with that statement is that, will thishappen again? In my opinion it will happen again. So, this is not the final crisis, and since it is not the first crisis, it will happen again. Based on the one that we had, let us get to the content. There will be three parts to this discussion. The first one is the causes of the crisis. The second one is the impact, and the third one is the future of the economic globalisation. Is the 2008 crisis a repeat of the 1998 crisis? In fact yes, and in between, the world has seen so many crises but the big crisis happen in 1932 when the whole world was in depression. Then, we have the present crisis. These are the two major crises that involved the whole world. In between we have many crises. For example in 1992, we had the Mexican crisis, in 1998 we had the Asian crisis, in 2001 we had dot com bubble crisis, and so forth. The difference between all the crises is the degree of the sovereignity. For some, it is restricted to some countries and some of it is regional. The only noticeable characteristic is that a crisis now occurs more often. Previously every 12 years, and then every 10 years. Now it is happening more often because the global economy is so integrated. So, if you look back and you see this pattern, this is what is going to happen.
 

 
Managing The Trilemma: The Case of Malaysia
Goh Soo Khoon
Centre for Policy Research and International Studies
Universiti Sains Malaysia
 
Abstract Ɩ Full Text
This paper discusses how Malaysia manages the trilemma, the conjecture that a country cannot simultaneously maintain an open capital account, an exchange rate stability, and monetary policy independence. Only two out of these three goals can be mutually consistent and policy makers have to decide which third goal to give up. The paper shows how Malaysia adopts an intermediate regime – a regime that enables policy makers to manage all the three goals simultaneously. The impact of the global financial crisis on the Malaysian economy and the policy options for Malaysia to deal with the recent huge capital outflows are discussed in this paper. The willingness by Bank Negara Malaysia to allow a certain extent of exchange rate adjustments in the face of current global crisis reflects that Malaysia is not exempted from the trilemma.
 
Keywords: Impossible trinity; Malaysia; global financial crisis.
 

 
Money Impartiality: Panacea for Economic Crisis
Jamal Othman
Faculty of Economics and Business
Universiti Kebangsaan Malaysia
 
Abstract Ɩ Full Text
This paper overviews the political-economics of FIAT and asset-based money. The paper further highlights the presumably syaria standpoint of the impartial character of money as the fundamental factor that differentiates asset-based money from the FIAT money. It is argued that while it is ideal for asset-based money to make a comeback in the interest of holistic wellbeing (maslahah) of humankind, it is necessary to complement it with an appropriate financial and regulatory system to safeguard its impartiality, i.e. non-tradable, non-interest bearing, and non-debt financing to avoid the recurring pitfalls which are immanent in the conventional financial system. It is hoped this rather concise paper will offer a thought provoking discourse on how syaria principles may present the world a useful ideological construct for a new monetary and financial architecture in light of the global financial crisis.
 
Keywords: Asset-based money; FIAT money; Syaria perspectives of money; money impartiality; money and sustainable development; money and financial crisis.
 

 
 
Global Financial Crisis: Lessons Learned
Nor Hayati Ahmad
UUM College of Business
Universiti Utara Malaysia
Abstract Ɩ Full Text
A financial crisis appears to occur in a certain pattern; it usually starts with a rally of bank credits against a backdrop of easier monetary policy, ample liquidity, and more relaxed banking regulations. Such financial environment stimulates excess leverage to fund assets in real estates and housing in which consumers take advantage of cheap money and borrow heavily, while bankers zealously lend out in order to achieve high loan growth targets. As with all levered instruments, this practice generates great profits when the asset value rises. In contrast, it produces great losses when the assets fall in value, forcing lenders to ration credits and to compete aggressively for funds to cover the resultant losses. Retrospectively, the Global Financial Crisis exhibits far reaching implications from the excessive leverage, deregulation and from the spiral effects of globalisation, financial speculation, product innovation, moral hazards, and incentives problems. This paper reflects how similar or different the Global Financial Crisis is from the past crises in terms of its causes and manifestations, how Malaysia was impacted, and what key lessons could be learned from it.
 
Keywords: Financial crisis; risk taking and banking.
 

 
Predictive Power of Output Growth, Inflation, and Interest Rate on Stock Return and Volatility: A Comparison
Wai Ching Poon
School of Business
Monash University
 
Gee Kok Tong
Faculty of Information Technology
Multimedia University
 
Abstract Ɩ Full Text
Using monthly data from seven mature and emerging markets and a battery of GARCH and EGARCH models, the study of Davis and Kutan (2003) on inflation and output on stock returns and volatility is extended by including interest rate to compare the effect between three mature markets (US, Japan, and Singapore) and four emerging markets who experienced a crisis before (Malaysia, India, Korea, and Philippines). It is found that economic volatility, as measured by movement in inflation, output growth, and interest rate, have a weak predictor power for stock market volatility and returns. In line with the evidence reported in Davis and Kutan (2003), the findings suggest that there is no support for the Fisher effect in stock returns among the seven mature and emerging markets.
 
Keywords: Predictive power; output; inflation; interest rate; stock return volatility.
 

 
Islamic Finance and its Contribution to Solving the Current Financial Crisis
Mohamed Sharif Bashir
Faculty of Business and Management Sciences
Sultan Sharif Ali Islamic University, Brunei Darussalam
 
Abstract Ɩ Full Text
As a result of the global financial crisis and its effects on the world economy, there is an increasing awareness and exploration of more vigorous frameworks and types of financial tools and intermediations. With its emphasis on asset-backed transactions, Islamic finance can contribute to overcoming the challenges and difficulties created by the current credit crisis. At its core, Islamic finance is concerned with the deployment of capital in genuine commercial activities that will benefit the whole world. So far, the techniques used in Islamic finance, if applied and executed properly, have created a much closer relationship among the customer, the financier, and the asset. In both principle and practice, Islamic finance prohibits the creation of debt through direct lending and borrowing, thus prohibiting excessive leverage, which is a root cause of the financial crisis. This paper highlights the strengths of Islamic finance in the context of the current financial and economic crisis. This paper examines whether Islamic finance could help to provide an alternative approach to the problems that led to the crisis that would prevent the repetition of a similar crisis in the future.
 
Keywords: Islamic finance; Islamic financial system; financial crisis; profit-loss sharing; risk management.
JEL Classification Code: G01; G21; G32, Z12.
 

 
The Global Crisis, Trade, and the Malaysian Economy
Shankaran Nambiar
Malaysian Institute of Economic Research
 
Abstract Ɩ Full Text
The importance of trade to the Malaysian economy cannot have been more strongly expressed than through the recent global crisis. Malaysia was vulnerable being a small open economy that has an export-dependent manufacturing sector. The very countries that generate the demand for Malaysia’s exports were struck by the crisis. As can be expected, Malaysia’s exports plummeted. The impacts of the crisis, consequently, caused reduced activity in the manufacturing sector and resulted in a sharp contraction in output. The crisis demands that policy makers take the challenge of strengthening the export sector more seriously.
 

 
Crises and the Volatility of Indonesian Macro-Indicators
Catur Sugiyanto
Faculty of Economics and Business
Universitas Gadjah Mada, Indonesia
 
Abstract Ɩ Full Text
This paper examines the volatility of some of Indonesian macroeconomic indicators, namely the Bank Indonesia rate, inflation, and exchange rates. It is argued that after the financial crisis the variability of these variables increases and this makes it more difficult to predict them. The estimated ARCH parameters increases overtime, indicating higher contribution of shock over several periods. From the random walk, historical mean, moving average and simple regression, it was found that the quality of prediction after the crisis decreases. Financial manager and other policy makers may adjust their strategy to account for this increase in variability.
 

 
Global Economic Crisis: Impact on Higher Education in Malaysia
Ramli Hassan & Mohammad Haji Alias
 
Abstract Ɩ Full Text
The global economy is reeling from the effects of financial crisis which led to an economic crisis triggered by the United States sub-prime mortgage crisis which started in late 2007. The sharp inflation in petroleum and food prices in the first half of 2008 also compounded the problem. The National Bureau of Economic Research (NBER) had declared that the US economy had been in recession since December 2007. Contraction in the growth rates of major developed economies thereby causing global trade in goods and services to plummet has affected open economies including Malaysia. Last year Malaysian GDP grew by about 4.6% over 2007. An ominous sign that economic growth in 2009 would be low or even negative was the 0.1% growth in GDP in the fourth quarter of 2008 compared to the same quarter in 2007. This was due mainly to a 40% drop in net exports. The slow down in growth has affected all sectors of the economy. Education in general and higher education in particular are not spared. Higher education has to compete for scarce public funds. The main objective of this paper is to understand the impact of the global economic crisis on higher education in Malaysia. A better understanding is imperative in order to prepare for the challenges ahead. The challenges ahead are within the framework of the new economic model being formulated by the government in order to lift Malaysia into a high income country within a decade. A major critical success factor is the implementation of an effective human capital development strategy.
 
Keywords: Economic crisis; higher education; recession.

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