Malaysia is an oil producer and its budget is highly dependent on its oil revenues other than on tax revenues. Prices of crude oil in early Oct 2018 were about US$74/barrel and in early Jan 2020, they were just above US$60/barrel. By mid-April 2020, however, they were about US$16/barrel. Analyze the effects of the drastic drop in oil prices on Malaysia’s current account, financial account, and the overall balance of payments. If Malaysia were to operate under a fixed exchange rate system (with US dollars), discuss how the system operates and explain how a fixed exchange rate will affect its foreign reserves.

Malaysia is an oil producer and its budget is highly dependent on its oil revenues other than on tax revenues. Prices of crude oil in early Oct 2018 were about US$74/barrel and in early Jan 2020, they were just above US$60/barrel. By mid-April 2020, however, they were about US$16/barrel. Analyze the effects of the drastic drop in oil prices on Malaysia’s current account, financial account, and the overall balance of payments. If Malaysia were to operate under a fixed exchange rate system (with US dollars), discuss how the system operates and explain how a fixed exchange rate will affect its foreign reserves.

Managerial Economics: Applications, Strategies and Tactics (MindTap Course List)

14th Edition

ISBN:9781305506381

Author:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Publisher:James R. McGuigan, R. Charles Moyer, Frederick H.deB. Harris

Chapter6: Managing In The Global Economy

Section: Chapter Questions

Problem 5E

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