Sense and Nonsense on Asia's Export Dependency and the Decoupling Thesis
Hong Kong Monetary Authority Working Paper No. 03/2007
27 Pages Posted: 5 Sep 2007
Date Written: April 2007
Abstract
It has often been argued that East Asia needs to switch from an export-led growth model to a domestic-demand led growth model so as to reduce its vulnerability to a sharp slowdown in the US economy. This paper argues that, indeed, in the foreseeable future, East Asia's business cycle is unlikely to decouple with that of the US, but the switch-of-growth-model argument is problematic because it mixes up the effects of external trade on an economy's cyclical developments and its long-term growth potential. The paper argues that the desirable way to reduce external vulnerabilities is to diversify export markets and to further strengthen domestic institutions and policies in order to reduce the impact of temporary shocks, not by reducing the degree of openness or the share of exports in GDP. The paper further agues that the rising size of domestic demand in Mainland China will overtime help the rest of the region to diversify its export markets away from the major industrialized countries.
Keywords: Export-led growth, domestic demand-led growth, decoupling
JEL Classification: F13, F43, O24, O11
Suggested Citation: Suggested Citation
Do you have negative results from your research you’d like to share?
Recommended Papers
-
Shocking Aspects of European Monetary Unification
By Tamim Bayoumi and Barry Eichengreen
-
International Business Cycles: World, Region, and Country-Specific Factors
By M. Ayhan Kose, Chris Otrok, ...
-
Understanding Changes in International Business Cycle Dynamics
By James H. Stock and Mark W. Watson
-
Trade, Finance, Specialization and Synchronization
By Jean M. Imbs
-
Trade, Finance, Specialization and Synchronization
By Jean M. Imbs
-
Trade, Finance, Specialization, and Synchronization
By Jean M. Imbs
-
Risk Sharing and Industrial Specialization: Regional and International Evidence
By Bent E. Sørensen, Sebnem Kalemli-ozcan, ...
-
Sectoral and National Aggregate Disturbances to Industrial Output in Seven European Countries