THE Malaysian government must study and understand the complexities of the current global financial crisis when drawing up a plan as it would otherwise only reflect "cosmetic changes", said former Prime Minister Tun Dr Mahathir Mohamad.
Injecting a few billion ringgit into the economy was not the answer to counter the current global financial crisis which is of a more enormous size compared to the previous ones, he said.
"It must be studied carefully. We must understand how this crisis came about. The government will find difficulty in facing the crisis and must be seen to be serious and this includes unpopular measures," he said, when he spoke about the future of Malaysia in light of global financial uncertainties in Putrajaya yesterday.
He was speaking at the "Bridges - Dialogues Towards a Culture of Peace" programme organised by Perdana Leadership Foundation.
Dr Mahathir was also sceptical of investments from the Middle East into the Iskandar Malaysia development corridor materialising.
"Worldwide, there has not been much foreign direct investments (FDIs) seen lately," he said.
The 2003 Nobel Laureate in economics Professor Dr Robert F.Engle who spoke on why financial market volatility is so high said volatility was now dramatically above levels since 1990.
"In the US, this is due to macroecononic uncertainty and credit processes associated with securitised debt," he said.
Volatility in the financial sector measures more than 120 per cent in the last few weeks.
Macroeconomic uncertainty can lead to high volatility which is also a natural response of any financial market to new information or news and in the case of asymmetric volatility, prices tend to go down and markets turn bearish, Engle added.
Engle also felt that fiscal policy would be needed to be in the forefront for authorities across the world to tackle the recession.
Business Times
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