{"id":8735,"date":"2011-08-15T19:14:15","date_gmt":"2011-08-15T11:14:15","guid":{"rendered":"http:\/\/maddruid.com\/?p=8735"},"modified":"2011-08-15T22:04:59","modified_gmt":"2011-08-15T14:04:59","slug":"2411-the-senate-screwed","status":"publish","type":"post","link":"https:\/\/maddruid.com\/?p=8735","title":{"rendered":"[2411] Malaysia’s long-run growth, 1955-2010"},"content":{"rendered":"

There is a famous graph depicting how real growth of the economy of the United States of America has been remarkably constant over time. It is remarkable in a sense that history deviates little from such constant growth rate. I was reminded of this after reading a post by Karl Smith at Modeled Behavior<\/a><\/em>.<\/p>\n

I had not seen the Malaysian version before and so, I decided to draw it myself.<\/p>\n

\"\"<\/p>\n

It does not exactly replicate what the famed US graph replicates. Rather, this is the natural log of the Malaysian nominal GDP instead.<\/p>\n

As you can see, the long-run growth rate is pretty much constant. The straight line that cuts through the series is the approximated long-run nominal growth rate (specifically, from 1955 to 2010. Why did I choose that particular period? The data at the IFS of the IMF goes only as far back as 1955. I could draw the real GDP but since real GDP growth will not deviate much from nominal GDP in terms of natural logarithm, I thought nominal values are good enough).<\/p>\n

Smith suggests that government policy does not matter in the long-run. I do not share that view but certainly, the tendency for growth to revert to a certain long-run growth rate is remarkable. Perhaps, what is more interesting are the deviations from the long-run growth.<\/p>\n

More relevantly, growth from 2008 to 2010 were lower than the long-run trend. That was caused by the global financial crisis.<\/p>\n

It is worth noting that the economy might be still operating below its potential, if the black line is a potential output growth to start with. In other words, there is an output gap. Yes, this is despite the great PEMANDU says and whatever their plans are.<\/p>\n

For those who claim the growth post-recession is all thanks to the Najib administration \u2014 let us pretend a little that their narrative is the right one right now \u2014 this is something they can chew on. Even with the base effect producing what seemed to be\u00a0spectacular\u00a0growth<\/a>, the Malaysian economy is possibly still operating below potential.<\/p>\n

With the possibility of a double dip coming, we could see a lot of excuses from Putrajaya soon. Claim the credit but cut the blame.<\/p>\n

Another interesting point is that the economic condition in the 1960s might have been Malaysia’s worst within the 55 years period when compared to the long-run trend. It also reaffirms that the 1990s were among the best years.<\/p>\n

What is mind boggling is that the Asian Financial Crisis does not register. I tend to believe that the crisis of the late 1990s was more severe than the recession of the late 2000s. I may need to check my premise.<\/p>\n","protected":false},"excerpt":{"rendered":"

There is a famous graph depicting how real growth of the economy of the United States of America has been remarkably constant over time. It is remarkable in a sense that history deviates little from such constant growth rate. I was reminded of this after reading a post by Karl Smith at Modeled Behavior. I […]<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[10],"tags":[1006],"class_list":["post-8735","post","type-post","status-publish","format-standard","hentry","category-economics","tag-economic-growth"],"_links":{"self":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/8735","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=8735"}],"version-history":[{"count":31,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/8735\/revisions"}],"predecessor-version":[{"id":8841,"href":"https:\/\/maddruid.com\/index.php?rest_route=\/wp\/v2\/posts\/8735\/revisions\/8841"}],"wp:attachment":[{"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=8735"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=8735"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/maddruid.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=8735"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}