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Euro zone debt crisis: Scenario analysis and implications for developing Asia-Pacific

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  • Sudip Ranjan Basu

    ()
    (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)

  • Clovis Freire

    ()
    (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)

  • Pisit Puapan

    ()
    (Macroeconomic Analysis Division, Ministry of Finance, Thailand. Part of the paper was written while Pisit Puapan was with the UNESCAP)

  • Vatcharin Sirimaneetham

    ()
    (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)

  • Yusuke Tateno

    ()
    (Macroeconomic Policy and Development Division, United Nations Economic and Social Commission for Asia and the Pacific)

Abstract

The ongoing euro zone debt crisis creates an undesirable scenario for the global economy as well as for the Asia-Pacific region given that the region has close economic linkages. The paper aims to provide quantitative estimates of the potential impact of the euro zone debt crisis on merchandise exports as well as on economic growth and poverty reduction efforts in the region. The results indicate that a one-percentage-point fall of output growth of the euro zone would result in a total export loss of $166 billion. In addition, the protectionist threats could further increase the loss in exports by $27 billion. On social development, the disorderly euro zone debt crisis scenario would prevent 8.19 million people to get out of poverty and another 1.15 million would be pushed back into poverty as per the $1.25-a-day poverty line. The paper illustrates that macroeconomic policy space appears adequate in most economies that tend to be more heavily affected by the euro zone debt crisis. But strong inflationary pressures and less favourable public debt conditions could prevent some economies from implementing swift and forceful macroeconomic policy responses.

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Paper provided by United Nations Economic and Social Commission for Asia and the Pacific (ESCAP) in its series MPDD Working Paper Series with number WP/12/03.

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Handle: RePEc:unt:wpmpdd:wp/12/03

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Related research

Keywords: Euro zone; Debt crisis; Growth; Inflation; Exports; Protectionism; Poverty reduction; Policy space;

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  1. Sudip Ranjan Basu & Fabien Dumesnil, 2012. "Evolution Of Non-Tariff Measures: Emerging Cases From Selected Developing Countries," UNCTAD Blue Series Papers, United Nations Conference on Trade and Development 52, United Nations Conference on Trade and Development.
  2. Geoffrey Ducanes & Marie Anne Cagas & Duo Qin & Pilipinas Quising & Mohammad Abdur Razzaque, 2006. "Macroeconomic Effects of Fiscal Policies: Empirical Evidence from Bangladesh, China, Indonesia and the Philippines," Working Papers, Queen Mary, University of London, School of Economics and Finance 564, Queen Mary, University of London, School of Economics and Finance.
  3. Pula, Gabor & Peltonen, Tuomas A., 2009. "Has emerging Asia decoupled? An analysis of production and trade linkages using the Asian international input-output table," Working Paper Series, European Central Bank 0993, European Central Bank.
  4. Bilge Erten, 2012. "Macroeconomic transmission of eurozone shocks to emerging economies," Working Papers 2012-12, CEPII research center.
  5. Dong He & Lillian Cheung & Jian Chang, 2007. "Sense and Nonsense on Asia's Export Dependency and The Decoupling Thesis," Working Papers 0703, Hong Kong Monetary Authority.
  6. Tang, Hsiao Chink & Liu, Philip & Cheung, Eddie C., 2010. "Changing Impact of Fiscal Policy on Selected ASEAN Countries," Working Papers on Regional Economic Integration, Asian Development Bank 70, Asian Development Bank.
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