The Financial Role of East Asian Economies in Global Imbalances: An Econometric Assessment of Developments after the Global Financial Crisis
AbstractThe central objective of this paper is to empirically assess how global imbalances have evolved since the global financial crisis of 2008/09. More specifically, we examine how the security investment positions of major East Asian economies in United States (US) financial markets—equities, bonds, and bank lending—changed after the crisis. Our econometric analysis, which is based on the gravity model to identify the determinants of foreign portfolio investment in the US, finds that the "overinvestment" of most East Asian economies in the US has remained substantial after the global financial crisis, especially in long-term bonds. That is, even after the crisis, most East Asian economies continue to hold excessive amounts of US securities, but the degree of overinvestment appears to have declined for some economies such as the PRC. However, the PRC still has the largest excessive holdings of US securities. We also find that East Asian economies over-invest in US financial markets largely due to excessive savings and foreign exchange reserves.
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Bibliographic InfoPaper provided by Asian Development Bank in its series Working Papers on Regional Economic Integration with number 118.
Length: 48 pages
Date of creation: 01 Aug 2013
Date of revision:
Global financial crisis; global imbalances; US; East Asia; portfolio investment;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F32 - International Economics - - International Finance - - - Current Account Adjustment; Short-term Capital Movements
- F34 - International Economics - - International Finance - - - International Lending and Debt Problems
- F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-10-05 (All new papers)
- NEP-OPM-2013-10-05 (Open Economy Macroeconomics)
- NEP-SEA-2013-10-05 (South East Asia)
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