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Asia crisis postmortem: where did the money go and did the United States benefit?

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Author Info

  • Eric van Wincoop
  • Kei-Mu Yi

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.

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Bibliographic Info

Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2000)
Issue (Month): Sep ()
Pages: 51-70

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Handle: RePEc:fip:fednep:y:2000:i:sep:p:51-70:n:v.6no.3

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Related research

Keywords: Financial crises - Asia ; Economic conditions - United States ; Flow of funds;

References

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  1. Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
  2. Takatoshi Ito, 1999. "Capital Flows in Asia," Discussion Paper Series a371, Institute of Economic Research, Hitotsubashi University.
    • Takatoshi Ito, 2000. "Capital Flows in Asia," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 255-298 National Bureau of Economic Research, Inc.
  3. Mankiw, N Gregory, 1985. "Consumer Durables and the Real Interest Rate," The Review of Economics and Statistics, MIT Press, vol. 67(3), pages 353-62, August.
  4. John Y. Campbell & N. Gregory Mankiw, 1990. "Consumption, Income, and Interest Rates: Reinterpreting the Time Series Evidence," NBER Working Papers 2924, National Bureau of Economic Research, Inc.
  5. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
  6. repec:fth:harver:1435 is not listed on IDEAS
  7. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
  8. Marvin Barth & Trevor Dinmore, 1999. "Trade prices and volumes in East Asia through the crisis," International Finance Discussion Papers 643, Board of Governors of the Federal Reserve System (U.S.).
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Citations

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Cited by:
  1. Kristin J. Forbes, 2001. "Are Trade Linkages Important Determinants of Country Vulnerability to Crises?," NBER Working Papers 8194, National Bureau of Economic Research, Inc.
  2. Thomas D. Willett & Aida Budiman & Arthur Denzau & Gab-Je Jo & Cesar Ramos & John Thomas, 2001. "The Falsification of Four Popular Hypotheses about International Financial Behavior during the Asian Crisis," Claremont Colleges Working Papers 2001-06, Claremont Colleges, revised Sep 2001.

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