As we know, Malaysia and South Korea, successful graduates of Asian Financial Crisis, employed different paths to recovery via Capital Control and IMF bail-out respectively. This paper tracks recovery trajectories of the two nations via orthodox and emergent growth indicators: GDP and GPI. We report unemployment, open-trade, fixed capital accumulation, and prior crisis to be influential determinants of both metrics, while credit and foreign exchange rate lack significance.
The 1997 Asian Financial Crisis serves as a pivotal point for measuring economic performances of most of its crisis-struck constituents. Within this literature, of particular import are Malaysia and South Korea—having applied dissimilar antidotes. The former adopted independent (capital controls) recovery plans, while Korea adopted the IMF treatment. Post-crisis, both nations are regarded as success stories, having achieved rapid growth, despite taking different routes, as measured by medium-term rates of GDP growth within a decade (Zumkehr & Andriesse, 2008).

The traditional yardstick of quantifying economic growth, GDP—along with its various derivatives like GNP and GNI, faces competition today from a number of alternative metrics. Economists and development experts of various disciplines, ranging as far back as 1960s, objected to multiple limitations of GDP as an economic performance measure. Most notably, sustainability advocates underscore GDP’s shortfalls as a general metric for well-being. These concerns have led to the experimentation and development of an eclectic array of indices for policy legislation from the 1970s onwards. Among them, Genuine Progress Indicator (GPI) has been demonstrating a rise in prominence as an alternative performance measure, particularly through reproduction at various regional and national levels as listed in Posner & Costanza (2011) and Bleys & Whitby (2015). Despite growing interest, quantification and adoption of GPI is very much in its infancy. Moreover, GPI figures are uncalculated for a great portion of world economies. For Malaysia and South Korea in particular, there are calls from academia and policy levels for development of GPI indices (Othman et al., 2014; Feeny et al., 2013).

GPI is best defined in its general framework based on the work of Talberth et al. (2007). As the metric’s parametrization is still a “work in progress,” a consensus on GPI’s definition is yet not reached. As such, countries applying the GPI measure broadly rely on the precedents set by other bodies and calibrate to suit its unique environment. Hence, a component of GPI for a country might not be the component for another country. Empirical attempts till date mostly use the same personal consumption data as GDP but make additions to account for the services from consumer durables, public infrastructure, volunteering, housework values, deductions to account for income inequality and costs of crime, environmental degradation, and loss of leisure. Its advocates claim that by incorporating the forestated variables this indicator better reflects sustainability performances of an economy.


In this paper, we construct GPI for South Korea and Malaysia from 1980 to 2014. Notwithstanding a few omissions in GPI components owing to data unavailability, we find GPI curves to be lower than their GDP counterparts. Our panel estimations reveal that external debt has a direct relationship to both GDP and GPI in the long term. However, capital controls are insignificant to both GDP and GPI measures. The results also suggest that unemployment rate, trade openness, fixed capital formation and history of previous crises are influential drivers of GDP and GPI. Credit and exchange rates, however, show inconsistent effects in GDP and GPI. Further explanation is by answering the three following questions.


Hashim, M., Sifat, I., & Mohamad, A. (2018) Tracking Genuine Economic Progress for IMF Debt or Capital Control: The Cases of Malaysia and South Korea. Economics & Business Letters, 7(4), Oviedo University Press.

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