Asia Crisis Postmortem: Where Did the Money Go and Did the United States Benefit?

20 Pages Posted: 7 Mar 2006

See all articles by Eric van Wincoop

Eric van Wincoop

University of Virginia - Department of Economics; National Bureau of Economic Research (NBER)

Kei-Mu Yi

University of Houston - Department of Economics; Federal Reserve Banks - Federal Reserve Bank of Minneapolis

Abstract

The Asia crisis was originally expected to affect the U.S. economy adversely, mainly through reduced exports to, and increased imports from, the crisis countries. However, U.S. GDP growth in 1998, at 4.3 percent, was surprisingly strong. This article examines the effect of the crisis on the U.S. economy, using a quantitative approach that focuses on capital outflows from Asia. It finds that banks were the primary mechanism by which the funds left Asia, and that these funds did not flow directly to the United States. Rather, they went first to offshore banking centers and then to European banks. In addition, the article uses an equilibrium framework to calculate the Asian capital outflows' impact on U.S. GDP. It finds that the overall impact was positive but small.

Keywords: Asia Crisis, U.S. economy, capital outflows

JEL Classification: F30, F32, F43

Suggested Citation

van Wincoop, Eric and Yi, Kei-Mu, Asia Crisis Postmortem: Where Did the Money Go and Did the United States Benefit?. Economic Policy Review, Vol. 6, No. 3, September 2000. Available at SSRN: https://ssrn.com/abstract=888764

Eric Van Wincoop

University of Virginia - Department of Economics ( email )

Rouss Hall 114
P.O. Box 400182
Charlottesville, VA 22904-4182
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804-924-3997 (Phone)
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National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Kei-Mu Yi (Contact Author)

University of Houston - Department of Economics

Houston, TX 77204-5882
United States

Federal Reserve Banks - Federal Reserve Bank of Minneapolis ( email )

90 Hennepin Avenue
Minneapolis, MN 55480
United States

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