Emerging Asia: Decoupling or Recoupling

31 Pages Posted: 24 Jan 2011

See all articles by Soyoung Kim

Soyoung Kim

Seoul National University

Jong-Wha Lee

Korea University

Cyn-Young Park

Asian Development Bank

Abstract

In this paper, we investigate the degree of real economic interdependence between emerging East Asian and major industrial countries to shed light on the heated debate over the decoupling of emerging East Asia. We first document the evolution of macroeconomic interdependence for emerging East Asian economies through changing trade and financial linkages at both the regional and global levels. Then, by employing a panel vector autoregression (VAR) model, we estimate the degree of real economic interdependence before and after the 1997/98 Asian financial crisis. Empirical findings show that real economic interdependence increased significantly in the post-crisis period, suggesting recoupling, rather than decoupling, in recent years. Output shocks from major industrial countries have a significant positive effect on emerging East Asian economies. More interestingly, the reverse is also true. Output shocks from emerging East Asia (and China) have a significant positive effect on output in major industrial countries. The result suggests that macroeconomic interdependence between emerging East Asia and industrial countries have become bi-directional, defying the traditional notion of the NorthSouth relationship as one of uni-directional dependence.

Suggested Citation

Kim, Soyoung and Lee, Jong-Wha and Park, Cyn-Young, Emerging Asia: Decoupling or Recoupling. The World Economy, Vol. 34, No. 1, pp. 23-53, 2011. Available at SSRN: https://ssrn.com/abstract=1745806 or http://dx.doi.org/10.1111/j.1467-9701.2010.01280.x

Soyoung Kim

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Jong-Wha Lee

Korea University ( email )

Anam-dong, Sungbuk-Ku
Dept. of Economics
Seoul, 136-701
82-2-3290-2216 (Phone)
82-2-928-4948 (Fax)

Cyn-Young Park

Asian Development Bank ( email )

6 ADB Avenue, Mandaluyong City 1550
Metro Manila
Philippines
(632) 632-5473 (Phone)

HOME PAGE: http://www.adb.org

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