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Asia crisis postmortem: where did the money go and did the United States benefit?

  • Eric Van Wincoop
  • Kei-Mu Yi

The Asia crisis was originally expected to affect the U.S. economy adversely, mainly through reduced exports to, and increased imports from, the crisis countries. However, U.S. GDP growth in 1998, at 4.3 percent, was surprisingly strong. This article examines the effect of the crisis on the U.S. economy, using a quantitative approach that focuses on capital outflows from Asia. It finds that banks were the primary mechanism by which the funds left Asia, and that these funds did not flow directly to the United States. Rather, they went first to offshore banking centers and then to European banks. In addition, the article uses an equilibrium framework to calculate the Asian capital outflows' impact on U.S. GDP. It finds that the overall impact was positive but small.

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Article provided by Federal Reserve Bank of New York in its journal Economic Policy Review.

Volume (Year): (2000)
Issue (Month): Sep ()
Pages: 51-70

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Handle: RePEc:fip:fednep:y:2000:i:sep:p:51-70:n:v.6no.3
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  1. John Y. Campbell & N. Gregory Mankiw, 1989. "Consumption, Income and Interest Rates: Reinterpreting the Time Series Evidence," NBER Chapters, in: NBER Macroeconomics Annual 1989, Volume 4, pages 185-246 National Bureau of Economic Research, Inc.
  2. Marvin Barth & Trevor Dinmore, 1999. "Trade prices and volumes in East Asia through the crisis," International Finance Discussion Papers 643, Board of Governors of the Federal Reserve System (U.S.).
  3. repec:fth:harver:1435 is not listed on IDEAS
  4. Takatoshi Ito, 1999. "Capital Flows in Asia," Discussion Paper Series a371, Institute of Economic Research, Hitotsubashi University.
    • Takatoshi Ito, 2000. "Capital Flows in Asia," NBER Chapters, in: Capital Flows and the Emerging Economies: Theory, Evidence, and Controversies, pages 255-296 National Bureau of Economic Research, Inc.
  5. Corsetti, G. & Pesenti, P. & Roubini, N., 1998. "What Caused the Asian Currency and Financial Crisis?," Papers 343, Banca Italia - Servizio di Studi.
  6. Steven Radelet & Jeffrey D. Sachs, 1998. "The East Asian Financial Crisis: Diagnosis, Remedies, Prospects," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 29(1), pages 1-90.
  7. N. Gregory Mankiw, 1983. "Consumer Durables and the Real Interest Rate," NBER Working Papers 1148, National Bureau of Economic Research, Inc.
  8. Beaudry, Paul & van Wincoop, Eric, 1996. "The Intertemporal Elasticity of Substitution: An Exploration Using a US Panel of State Data," Economica, London School of Economics and Political Science, vol. 63(251), pages 495-512, August.
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