Asia's Rebalancing and Growth

23 Pages Posted: 10 Oct 2018

See all articles by Soyoung Kim

Soyoung Kim

Seoul National University

Jong‐Wha Lee

Korea University

Warwick J. McKibbin

Brookings Institution

Date Written: October 2018

Abstract

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 labour productivity shocks have significant, positive and permanent effects. Simulations using a global intertemporal multisector general equilibrium model suggest that labour productivity shocks increase the foreign GDP over time, but rebalancing shocks have a negative international spillover effect. In addition, labour productivity shocks help in rebalancing. Structural reforms promoting labour productivity growth along with rebalancing policies across Asia can achieve higher economic growth worldwide.

Keywords: Asia, export‐led growth, multicountry simulation model, rebalancing, vector autoregression

Suggested Citation

Kim, Soyoung and Lee, Jong‐Wha and McKibbin, Warwick J., Asia's Rebalancing and Growth (October 2018). The World Economy, Vol. 41, Issue 10, pp. 2709-2731, 2018, Available at SSRN: https://ssrn.com/abstract=3264301 or http://dx.doi.org/10.1111/twec.12608

Soyoung Kim (Contact Author)

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)
+82-2-880- 2689 (Phone)

Jong‐Wha Lee

Korea University

Warwick J. McKibbin

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

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