Asia's Rebalancing and Growth
56 Pages Posted: 2 Nov 2017
Date Written: November 1, 2017
The paper investigates the impact of Asia’s demand rebalancing and supply-side productivity changes on long-term economic growth in Asia and worldwide. Results from a panel vector autoregression model show that a productivity-neutral demand rebalancing shock has no permanent effect on Asian output, whereas labor productivity shocks have significant, positive, and permanent effects. Simulations using a global intertemporal multi-sector general equilibrium model suggest that labor productivity shocks increase the foreign GDP over time, but rebalancing shocks have a negative international spillover effect. In addition, labor productivity shocks helps rebalancing. Structural reforms promoting labor productivity growth along with rebalancing policies across Asia can achieve higher economic growth worldwide.
Keywords: Rebalancing, Export-Led Growth, Asia, VAR, Multi-Country Simulation Model
JEL Classification: F41, F43, F47, 053
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