The East Asian crisis highlights the importance of liquidity for smooth functioning of the banking system. It also shows the vulnerabilities that arise as a result of high dependence on international liquidity. This article empirically analyses the influx of liquidity before the crisis and...

The paper assesses the transmission of foreign inflationary disturbances for Malaysia. Using quarterly data from 1971 to 2003, we form a four–variable vector error correction model (VECM) consisting of domestic prices, US prices, Ringgit exchange rate and relative interest rate. Apart...