Global Linkages and Economic Rebalancing in East Asia (233 Pages)

In The Wake Of The Global Financial Crisis, Leading Industrialized Countries Have Managed To Show Only A Gradual Recovery, While East Asian Economies Have Surged Ahead. In Particular, China Achieved Growth In Excess Of 10% In 2010 And Is Expected To Continue Growing At A Rapid Pace. It Appears That In The Coming Years, East Asia Will Play An Even Greater Role As A Growth Center Leading Global Economic Expansion. Following The Asian Currency Crisis Of 1997oco98, Consumption And Investment In The Region Decreased Considerably, And East Asian Economies Recovered On The Strength Of Exports. Presently, However, Amid A Less-than-robust Recovery In The Us And Europe, The Sustainability Of East Asia''s Reliance On Export-led Growth Has Been Called Into Question. The Region''s Transition To Growth Based On A Balance Of Foreign And Domestic Demand Is Important For Both Building A Stronger Foundation For Sustainable Growth And Buttressing Global Economic Expansion. Moreover, The Rebalancing Of Demand In East Asia Holds The Key To Rectifying Global Current Account Imbalances Oco The Disadvantage Of Uneven International Capital Flows. This Unique Volume Illuminates Policy Issues Involved In The Efforts To Promote The Rebalancing Of Demand In East Asia. CONTENTS 6 About the Editors 12 Introduction 14 Part 1. Business Cycle Synchronization 16 Part 2. Effects of Policy and Institutional Changes 17 Part 3. Challenges to China’s Rebalancing and Sustainable Growth 19 Acknowledgment 20 References 20 Chapter 1 Decoupling — A Re-Examination Hiroshi Tsubouchi and Hideaki Matsuoka 22 1. Introduction 22 2. Looking Back at the World Economy Since 1990s 23 2.1. 1990s — before the Asian financial crisis 24 2.2. First half of the 2000s — before the global financial crisis 25 2.3. The latter half of the 2000s — after the global financial crisis 26 3. Factors Affecting Decoupling 27 4. Methodology 29 5. Decomposition of the Forecast Variance 32 6. Conclusion 35 7. Supplementary Discussion — Why is a Time-varying Parameter Model Used? 36 Acknowledgments 38 References 38 Chapter 2 Business Cycle Synchronization and Production Fragmentation in East Asia Fumihide Takeuchi 40 1. Introduction 40 2. Related Literature 42 3. The Correlation of Business Cycles and Fragmentation 43 3.1. Business cycle synchronization in East Asia and in major advanced countries 43 3.2. Fragmentation of production in East Asia and Japan/the United States 46 3.3. Changes in the economic environment after the Asian financial crisis 46 4. Structural FAVAR 48 4.1. Model 48 4.2. Data and model selection 49 4.3. Empirical Results 51 4.3.1. Variance decomposition 51 4.3.2. Examination of the factors 54 5. Conclusion 60 References 61 Chapter 3 Financial Market Linkage in East Asian Countries Kyosuke Shiotani and Yoichi Matsubayashi 64 1. Introduction 64 2. Literature Review 66 3. Methodologies: Bayesian Network Model 69 4. Empirical Evidence 70 4.1. Data 70 4.2. Empirical study 70 5. Conclusion 77 Appendix: Concept and Structure of Bayesian Network 78 A.1. Basic concept 78 A.2. Parameter estimation 80 A.3. Learning the Bayesian network 81 References 82 Chapter 4 The Impact of East Asian FTAS on the Structure of Demand Hikari Ban 86 1. Introduction 86 2. Framework and Data 87 2.1. CGE and I–O analysis 87 2.2. The GTAP model 88 2.3. The I–O model 89 2.4. Database 91 3. CGE Analysis 93 3.1. Simulation scenario 93 3.2. Simulation results 94 4. Input–Output Analysis 98 4.1. Dependence on foreign final demand 98 4.2. Ripple effects 100 5. Conclusion 102 Appendix 103 References 104 Chapter 5 Inflation Targeting in South Korea, Indonesia, the Philippines and Thailand: The Impact on Business Cycle Synchronization Between Each Country and the World Takeshi Inoue, Yuki Toyoshima and Shigeyuki Hamori 106 1. Introduction 107 2. Background and Features of IT in the Four Asian Countries 108 2.1. South Korea 108 2.2. Indonesia 110 2.3. The Philippines 113 2.4. Thailand 114 2.5. Effectiveness of IT in the four Asian countries 117 3. Literature Review 118 4. Impact of IT Adoption on Business Cycle Synchronization with the Rest of the World 120 4.1. Empirical techniques 120 4.2. Data 121 4.3. Empirical results 122 5. Conclusion 125 Appendix 126 References 127 Chapter 6 Globalization and Economic Growth in East Asia Fengbao Yin and Shigeyuki Hamori 130 1. Introduction 130 2. The Formation of the East Asian Economic Sphere 132 2.1. Diversity in East Asia 132 2.2. De facto economic integration 134 2.3. Formation factors 139 2.3.1. The Plaza Accord 139 2.3.2. The Asian currency crisis 140 2.3.3. APEC and ASEAN 141 2.3.4. China's ascent to prominence 143 3. The Globalization of East Asia 144 3.1. The KOF index of globalization 144 3.2. The globalization of East Asia based on the KOF index 145 3.3. Advance of globalization by country and region 146 3.3.1. Japan 146 3.3.2. South Korea 148 3.3.3. China 149 3.3.4. ASEAN 151 4. The Effects of Globalization on East Asia 152 4.1. Empirical analysis before the Asian currency crisis 153 4.2. Empirical analysis after the Asian currency crisis 156 5. Conclusion 157 References 158 Chapter 7 Can South–South Trade Be A Driving Force for Future Economic Growth? Shigesaburo Kabe 160 1. Introduction 160 2. Why is South–South Trade Important? 163 3. Current Status of South–South Trade 169 4. How to Expand South–South Trade in the Future 171 4.1. Tariff reduction and facilitation of trade 173 4.2. Full usage of regional integration and cooperation 173 4.3. Development of service trade 175 4.4. Mutual understanding of socio-cultural aspects 177 5. Conclusion 178 References 178 Chapter 8 An Empirical Analysis of the Determinants of Household Saving (Consumption) in China: A Panel Analysis of Provincial Data, 1995–2010 Guifu Chen 180 1. Introduction 180 2. The Chinese Saving Puzzle and the Life-Cycle and Permanent Income Hypothesis 182 3. Empirical Techniques and Data 185 4. Empirical Results 189 5. Conclusion 198 Acknowledgments 199 References 200 Chapter 9 Financing Infrastructure Construction in China Long Ke 202 1. Introduction 202 2. The Constraints of Economic Development and Infrastructure Projects 203 3. The Role of Government in Infrastructure Development 206 4. The New Stage of Infrastructure Development 207 5. PFI-Based Infrastructure Development 208 6. Privatization, Liberalization and Deregulation 210 7. Conclusion 211 References 212 Chapter 10 Is the Renminbi Appreciating Fast Enough? Takuji Kinkyo 214 1. Introduction 214 2. Review of BEER Approach 215 3. Econometric Methodology and Results 218 4. Exchange Rate Regimes and Undervaluation 222 5. Conclusion 225 Appendix 227 References 228 Index 232 In the wake of the global financial crisis, leading industrialized countries have managed to show only a gradual recovery, while East Asian economies have surged ahead. In particular, China achieved growth in excess of 10 per cent in 2010 and is expected to continue growing at a rapid pace. It appears that in the coming years, East Asia will play an even greater role as a growth center leading global economic expansion. Following the Asian currency crisis of 1997 - 98, consumption and investment in the region decreased considerably, and East Asian economies recovered on the strength of exports. Presently, however, amid a less-than-robust recovery in the US and Europe, the sustainability of East Asia's reliance on export-led growth has been called into question. The region's transition to growth based on a balance of foreign and domestic demand is important for both building a stronger foundation for sustainable growth and buttressing global economic expansion. Moreover, the rebalancing of demand in East Asia holds the key to rectifying global current account imbalances - the disadvantage of uneven international capital flows. This unique volume illuminates policy issues involved in the efforts to promote the rebalancing of demand in East Asia