Asia's Rebalancing and Growth

56 Pages Posted: 2 Nov 2017

See all articles by Soyoung Kim

Soyoung Kim

Seoul National University

Jong-Wha Lee

Korea University

Warwick J. McKibbin

Australian National University

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

Suggested Citation

Kim, Soyoung and Lee, Jong-Wha and McKibbin, Warwick J., Asia's Rebalancing and Growth (November 1, 2017). CAMA Working Paper No. 66/2017. Available at SSRN: or

Soyoung Kim (Contact Author)

Seoul National University ( email )

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)

Warwick J. McKibbin

Australian National University ( email )

Crawfrod School of Public Policy
Canberra, ACT 2600
02-61250301 (Phone)
02-62735575 (Fax)


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