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Macroeconomic Adjustments and the Real Economy in Korea and Malaysia since 1997
This paper aims to review the post-crisis macroeconomic adjustment and the impact of policy responses on the real economy in Korea and Malaysia. While both countries suffered under the Asian financial crisis, their policy response..
Zainal-Abidin Mahani et al. Date 2003.06.25
Monetary policyDownloadContentExecutive Summary
I. Introduction
II. Post-Crisis Macroeconomic Adjustments in Korea and Malaysia
1. Korea
2. Malaysia
III. Policy Responses for Crisis Resolution
1. Policy Responses in Korea
2. Policy Responses in Malaysia
IV. Assessment of the Adjustment Process in Korea and Malaysia
V. Policy Implications
ReferencesSummaryThis paper aims to review the post-crisis macroeconomic adjustment and the impact of policy responses on the real economy in Korea and Malaysia. While both countries suffered under the Asian financial crisis, their policy responses were quite different. Korea sought liquidity assistance from the IMF, which obliged it to comply with the IMF's structural adjustment program, while Malaysia was able to maintain policy independence in the process of crisis resolution. Korea and Malaysia adopted policies at opposite extremes in terms of capital market opening in response to the crisis. For example, Korea drastically liberalized its capital account (but kept a few restrictions of capital outflows by residents) with a free floating exchange rate regime, while Malaysia implemented more stringent capital controls with a return to a fixed exchange rate regime. Despite the different policy stances in terms of capital account and exchange rate regime, the swift change toward an expansionary macroeconomic policy stance helped the two economies recover quickly. The positive role of counter-cyclical macroeconomic policies in the post-crisis recovery raises the question of whether the initial tightening of monetary and fiscal policy was kept high for too long and as a consequence deepened the crisis in Korea. -
Potential Impact of Changes in Consumer Preferences on Trade in the Korean and World Motor Vehicle Industry
In recent years, the United States has accused Korea of having an 'anti-import' bias when it comes to motor vehicles. US maintains that imports of motor vehicles in Korea is 'unusually low' because Korean consumers will not purcha..
Sang-yirl Nam et al. Date 2003.06.25
Trade disputeDownloadContentSummaryIn recent years, the United States has accused Korea of having an 'anti-import' bias when it comes to motor vehicles. US maintains that imports of motor vehicles in Korea is 'unusually low' because Korean consumers will not purchase foreign vehicles due to 'nationalistic' or 'patriotic' reasons. In this paper we look at what would happen if consumers, Korean and worldwide, eliminate their preference for domestic vehicles and judge both domestic and imported vehicles from different sources on equal criteria in terms of substitutability among them. Since tariff barriers for passenger cars in Korea are relatively low at 8%, a traditional approach, which looks at trade liberalization through tariff reduction, is not likely to show a substantial change on trade. To examine the possible consequences of changes in consumer preference on trade, we see what happens when substitution elasticities concerning consumption behavior between domestic and imported motor vehicles are changed in the GTAP model. When the entire world eliminates its discriminatory preference for domestic motor vehicles, motor vehicle industry imports and exports for all countries will increase. In addition, the domestic production and trade balance of the motor vehicle industry, welfare, and GDP will rise or improve for motor vehicle net-exporting countries such as 'Korea,' 'Japan' and 'EU', while the variables for motor vehicle net-importing countries such as 'US,' 'Other Asia' and 'Rest of the World' will fall or worsen. -
The effects of capital outflows from neighboring countries on a home country's terms of trade and real exchange rate: The Case of East Asia
While there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research o..
Sammo Kang Date 2003.06.15
Monetary policy, Exchange rateDownloadContentExecutive Summary
Ⅰ. Introduction
Ⅱ. General equilibrium model of two countries, two periods, and three goods
Ⅲ. Empirical Analysis
1. VAR Impulse Response Analysis
2. Variance Decomposition
Ⅳ. Conclusion
References
Appendix
A. Assumptions used to simplify the model
B. Effect on the price of exportable
C. Effect on the price of importables
D. Effect on the home country's real exchange rate in period 1
E. Effect on the real exchange rate in period 2 in the home countrySummaryWhile there is an extensive body of empirical analyses showing that currency crises tend to be regionally concentrated to specific areas and contagious to countries with high levels of trade, there has been insufficient research on the mechanisms underlying such tendencies. Using a two-country model, we investigate the possibility of a deterioration in the terms of trade and a rise in the real exchange rate of a home country in the case of capital outflows from its trade partner. In addition, an empirical analysis of East Asian countries conclusively shows that some countries conform to the model. If the actual real exchange rates do not rise immediately but remain overvalued, a currency crisis in the home country would become more likely. Generally, neighboring countries trade extensively with one another for reasons like low logistics costs. This paper finds that such patterns of trade can be one reason for a currency crisis being regional -
Dynamics of Open Economy Business Cycle Models: The Case of Korea
A small open economy such as Korea is vulnerable to outside shocks, in particular, world interest rate shocks, exchange rate shocks (or the terms of trade shocks), and foreign productivity shocks. Many researchers have empiricall..
Hyungdo Ahn et al. Date 2003.06.10
Economic developmentDownloadContentExecutive Summary
I. Introduction
II. Business Cycles in Korea
III. Model
IV. Calibration
V. Comparing the second moments
VI. Impulse Responses
1. Productivity shocks
2. Terms of trade (TOT) shock
3. Interest rate and government spending shocks
VII. Conclusion
References
AppendixSummaryA small open economy such as Korea is vulnerable to outside shocks, in particular, world interest rate shocks, exchange rate shocks (or the terms of trade shocks), and foreign productivity shocks. Many researchers have empirically analyzed the effects of these shocks on macroeconomic variables using various time series estimation methods including the VAR. However, there has been an increasing demand for an analysis based on a simulation method using dynamic stochastic general equilibrium (DSGE) models, because the empirical estimation can only provide ad-hoc economic interpretations of the results. (The rest is omitted.) -
The Need for Intraregional Exchange Rate Stability in Emerging East Asian Economies
There are three major reasons why the emerging East Asian market economies need to cooperate to concert their exchange rate policies. (The rest is omitted.)
Jonghwa Cho Date 2003.05.01
Monetary policy, Exchange rateDownloadContentI. Introduction
II. Deepening of Intraregional Trade Relations
III. Rise in Export Competitiveness among East Asian Countries
IV. Intraregional Exchange Rate Fluctuations and Macroeconomic Instability
V. ConclusionSummaryThere are three major reasons why the emerging East Asian market economies need to cooperate to concert their exchange rate policies. (The rest is omitted.) -
China's Economy: Annual Report 2003
This report is the annual report 2003 of China's economy. Chapter I examines recent political trends and prospects. Chapter II looks at China's domestic market and its policy implications. Chapter III reviews the issue of foreign ..
Co-authors Date 2003.04.20
DownloadContentSummaryThis report is the annual report 2003 of China's economy. Chapter I examines recent political trends and prospects. Chapter II looks at China's domestic market and its policy implications. Chapter III reviews the issue of foreign trade and its opening. Industrial trend is the subject of Chapter IV, which specifically looks at IT industry, the textile and electronics industry, the shipbuilding and steel industry, the auto industry, the distribution industry and the supply and demand of energy. China's regional investment environment and its prospects are examined in Chapter V. Current status and prospects to promote economic relations between Korea and Russia are presented in Chapter VI. -
International Capital Flows and Business Cycles in the Asia Pacific Region
This paper documents the evidence of business cycle synchronization in the selected Asia Pacific countries in the 1990s. We also find that business cycles in the Asian crisis countries are highly synchronized with those in Japan...
Soyoung Kim et al. Date 2003.03.25
Financial liberalization, Financial integrationDownloadContentSummaryThis paper documents the evidence of business cycle synchronization in the selected Asia Pacific countries in the 1990s. We also find that business cycles in the Asian crisis countries are highly synchronized with those in Japan. We explain business cycle synchronization by focusing on the channel of international capital flows. Using the VAR method, we find that most Asian countries experience boom-bust cycles following capital inflows and that boom in output is mostly driven by consumption and investment. Empirical evidence also shows that capital flows in the region are highly correlated, which supports the conclusion that capital market liberalization contributed to business cycle synchronization in Asia. -
Application of Competition Policy to Parallel Imports: A Comparative Study of Korean and Japanese Cases
Application of Competition Policy to Parallel Imports: Comparative Study of Korean and Japanese CasesMikyung Yun/Kyu Uck Lee Parallel imports refers to genuine products which are protected by intellectual property rights but are ..
Kyu Uck Lee et al. Date 2003.03.25
Trade policyDownloadContentSummaryApplication of Competition Policy to Parallel Imports: Comparative Study of Korean and Japanese CasesMikyung Yun/Kyu Uck Lee
Parallel imports refers to genuine products which are protected by intellectual property rights but are imported without express authorization from the owners of the intellectual property rights. Exhaustion of rights on first sale are usually recognised within national borders but there is no consensus on this for goods that cross the borders, and it is possible for parallel imports to infringe right holders in the importing country, depending on the legal framework in the importing country. (The rest is omitted.) -
How to Mobilize the Asian Savings within the Region: Securitization and Credit Enhancement for the Development of East Asia's Bond Market
The Asian crisis in 1997 has brought significant changes to the form of capital flows in East Asia, and to the structure of capital market in the region. One of the biggest changes in the capital movement in East Asia and develo..
Gyutaeg Oh et al. Date 2003.03.25
Capital marketDownloadContentExecutive Summary
I. Introduction
II. Trends and Characteristics of Capital Flows in East Asia
III. The Reasons Why We Need a Securitization Scheme in East Asia
IV. Securitization and Credit Enhancement in East Asia
V. Conclusion
ReferencesSummaryThe Asian crisis in 1997 has brought significant changes to the form of capital flows in East Asia, and to the structure of capital market in the region. One of the biggest changes in the capital movement in East Asia and development of the East Asian capital market is current account surplus of most major East Asian countries, including the crisis countries since the 1997 Asian currency crisis. This led them to switch from being capital importers to capital exporters. (The rest is omitted.) -
World Economic Outlook 2003
In early 2002, the global economy seemed to have started a robust recovery from the global recession, but inthe second quarter of the year it began to falter again. The growing uncertainties in the international economy have been ..
Bak-Soo Kim ed. Date 2003.03.10
Economic outlookDownloadContentSummaryIn early 2002, the global economy seemed to have started a robust recovery from the global recession, but inthe second quarter of the year it began to falter again. The growing uncertainties in the international economy have been magnified by uncertainties in the US economy: corporate financing scandals that eroded confidence in the corporate sector, deteriorating profitability, weakening dollar and growing capital withdrawals, equity market decline, widening current account deficits, and the possibility of a war against Iraq. The delayed recovery of the U.S. economy is also a contributing factor to the weakening economy in Western Europe and Japan. (The rest is omitted.)
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