Sense and Nonsense on Asia's Export Dependency and The Decoupling Thesis
AbstractIt has often been argued that East Asia needs to switch from an export-led growth model to a domestic-demand led growth model so as to reduce its vulnerability to a sharp slowdown in the US economy. This paper argues that, indeed, in the foreseeable future, East Asia's business cycle is unlikely to decouple with that of the US, but the switch-of-growth-model argument is problematic because it mixes up the effects of external trade on an economy's cyclical developments and its long-term growth potential. The paper argues that the desirable way to reduce external vulnerabilities is to diversify export markets and to further strengthen domestic institutions and policies in order to reduce the impact of temporary shocks, not by reducing the degree of openness or the share of exports in GDP. The paper further argues that the rising size of domestic demand in Mainland China will overtime help the rest of the region to diversify its export markets away from the major industrialized countries.
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Bibliographic InfoPaper provided by Hong Kong Monetary Authority in its series Working Papers with number 0703.
Length: 27 pages
Date of creation: Apr 2007
Date of revision:
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Export-led growth; domestic demand-led growth; decoupling;
Find related papers by JEL classification:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
- O24 - Economic Development, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-09-09 (All new papers)
- NEP-CNA-2007-09-09 (China)
- NEP-INT-2007-09-09 (International Trade)
- NEP-SEA-2007-09-09 (South East Asia)
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