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Challenges and Choices in Post-Crisis East-Asia : Simulations of Investment Policy Reform in an Intertemporal,Global Model

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  • Erinc Yeldan
  • Wenli Li
  • Xinshen Diao

Abstract

The East Asian financial crisis exposed the problems of excessive government intervention in credit allocation and poor supervision of the banking system. We argue that the crisis is an opportunity to reformulate the strategies of growth by way of eliminating politicized intervention on investment. In an intertemporal general equilibrium model, we examine the adjustment processes of the crisis-hit region and the world economies, and investigate the removal of the investment subsidies. Our results suggest that the immediate impact of the crisis on the Asian economies is a contraction of GDP and investment. We also find significant welfare gains in the crisis-hit economies in response to elimination of the subsidies to firm's investment.
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Suggested Citation

  • Erinc Yeldan & Wenli Li & Xinshen Diao, 1998. "Challenges and Choices in Post-Crisis East-Asia : Simulations of Investment Policy Reform in an Intertemporal,Global Model," Working Papers 9816, Department of Economics, Bilkent University.
    • Handle: RePEc:bil:wpaper:9816
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    References listed on IDEAS

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    1. Diao, Xinshen & Somwaru, Agapi, 2000. "An Inquiry on General Equilibrium Effects of MERCOSUR--An Intertemporal World Model," Journal of Policy Modeling, Elsevier, vol. 22(5), pages 557-588, September.
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    6. Diao, Xinshen & Roe, Terry & Yeldan, Erinc, 1999. "Strategic policies and growth: an applied model of R&D-driven endogenous growth," Journal of Development Economics, Elsevier, vol. 60(2), pages 343-380, December.
    7. Dalla, I. & Khatkhate, D., 1995. "Regulated Deregulation of the Financial System in Korea," World Bank - Discussion Papers 292, World Bank.
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    Cited by:

    1. Adelman, Irma & Yeldan, Erinc, 2000. "The Minimal Conditions for a Financial Crisis: A Multiregional Intertemporal CGE Model of the Asian Crisis," World Development, Elsevier, vol. 28(6), pages 1087-1100, June.

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