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Monetary Transmission of Global Imbalances in Asian Countries

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  • Il Houng Lee
  • Woon Gyu Choi

Abstract

The paper explores the linkages between the global and domestic monetary gaps, and estimates the effects of monetary gaps on output growth, inflation, and net saving rates using panel data for 20 Asian countries for 1980-2008. We find a significant pass-through of the global monetary gap to domestic monetary gaps, which in turn affect output growth and inflation, in individual emerging market and developing countries in Asia. Notably, we provide evidence that the global monetary condition is partly responsible for the current account surplus in Asia. We also draw implications for monetary policy coordination for global rebalancing.

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Bibliographic Info

Paper provided by International Monetary Fund in its series IMF Working Papers with number 10/214.

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Length: 26
Date of creation: 01 Sep 2010
Date of revision:
Handle: RePEc:imf:imfwpa:10/214

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Keywords: Monetary policy; Asia; Capital flows; Economic models; Export competitiveness; Production growth; Savings; inflation; monetary fund; real rates; real output; real interest rates; foreign exchange; monetary transmission; real interest rate; expansionary monetary policy; domestic monetary policy; monetary economics; monetary condition; monetary conditions; average inflation; inflation tax; inflationary pressures; transmission of monetary policy; monetary stance; money market; optimal monetary policy; low inflation; percent inflation; inflation dynamics; international monetary policy; financial stability; monetary expansions; government securities; domestic monetary policies; monetary policies;

This paper has been announced in the following NEP Reports:

References

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  1. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1996. "Inflows of capital to developing countries in the 1990s," MPRA Paper 13707, University Library of Munich, Germany.
  2. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "The Modern History of Exchange Rate Arrangements: A Reinterpretation," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 119(1), pages 1-48, February.
  3. Carmen M. Reinhart & Kenneth S. Rogoff, 2004. "Serial Default and the "Paradox" of Rich-to-Poor Capital Flows," American Economic Review, American Economic Association, American Economic Association, vol. 94(2), pages 53-58, May.
  4. Astley, Mark & Giese, Julia & Hume, Michael & Kubelec, Chris, 2009. "Global imbalances and the financial crisis," Bank of England Quarterly Bulletin, Bank of England, Bank of England, vol. 49(3), pages 178-190.
  5. Reinhart, Carmen & Calvo, Guillermo & Leiderman, Leonardo, 1994. "The capital inflows problem: Concepts and issues," MPRA Paper 13902, University Library of Munich, Germany.
  6. Elekdag, Selim & Tchakarov, Ivan, 2007. "Balance sheets, exchange rate policy, and welfare," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 31(12), pages 3986-4015, December.
  7. Marco E. Terrones & Enrique G. Mendoza & Ceyhun Bora Durdu, 2008. "Precautionary Demand for Foreign Assets in Sudden Stop Economies: An Assessment of the New Mercantilism," 2008 Meeting Papers 56, Society for Economic Dynamics.
  8. Michael P. Dooley & David Folkerts-Landau & Peter Garber, 2004. "The Revived Bretton Woods System: The Effects of Periphery Intervention and Reserve Management on Interest Rates & Exchange Rates in Center Countries," NBER Working Papers 10332, National Bureau of Economic Research, Inc.
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Cited by:
  1. Il Houng Lee & Xu Qingjun & Murtaza H. Syed, 2013. "China’s Demography and its Implications," IMF Working Papers 13/82, International Monetary Fund.
  2. Filardo , Andrew J. & Siklos , Pierre L., 2013. "Prolonged reserves accumulation, credit booms, asset prices and monetary policy in Asia," BOFIT Discussion Papers, Bank of Finland, Institute for Economies in Transition 5/2013, Bank of Finland, Institute for Economies in Transition.

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