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

Author

Listed:
  • Eric Van Wincoop
  • Kei-Mu Yi

Abstract

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.

Suggested Citation

  • Eric Van Wincoop & Kei-Mu Yi, 2000. "Asia crisis postmortem: where did the money go and did the United States benefit?," Economic Policy Review, Federal Reserve Bank of New York, issue Sep, pages 51-70.
    • Handle: RePEc:fip:fednep:y:2000:i:sep:p:51-70:n:v.6no.3
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    4. Phillip Anthony O'Hara, 2003. "Deep Recession and Financial Instability or a New Long Wave of Economic Growth for U.S. Capitalism? A Regulation School Approach," Review of Radical Political Economics, Union for Radical Political Economics, vol. 35(1), pages 18-43, March.
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    7. Falk Bräuning & Viacheslav Sheremirov, 2021. "The Transmission Mechanisms of International Business Cycles: Output Spillovers through Trade and Financial Linkages," Working Papers 21-13, Federal Reserve Bank of Boston.
    8. Owen F. Humpage, 2001. "International financial flows and the current business expansion," Policy Discussion Papers, Federal Reserve Bank of Cleveland, issue Apr.
    9. Richard H. Clarida, 2019. "Global Shocks and the U.S. Economy : a speech at the \"The Euro Area: Staying the Course through Uncertainties\" BDF Symposium and 34th SUERF Colloquium sponsored by Banque de France and the European Money and Finance Forum, Paris, France, ," Speech 1049, Board of Governors of the Federal Reserve System (U.S.).
    10. Kristin J. Forbes, 2002. "Are Trade Linkages Important Determinants of Country Vulnerability to Crises?," NBER Chapters, in: Preventing Currency Crises in Emerging Markets, pages 77-132, National Bureau of Economic Research, Inc.
    11. Das, Debojyoti & Kannadhasan, M., 2020. "The asymmetric oil price and policy uncertainty shock exposure of emerging market sectoral equity returns: A quantile regression approach," International Review of Economics & Finance, Elsevier, vol. 69(C), pages 563-581.
    12. Koutmos, Gregory & Martin, Anna D., 2011. "Currency bid-ask spread dynamics and the Asian crisis: Evidence across currency regimes," Journal of International Money and Finance, Elsevier, vol. 30(1), pages 62-73, February.
    13. Pierluigi Montalbano & Alessandro Federici & Umberto Triulzi & Carlo Pietrobelli, 2005. "Trade Openness and Vulnerability in Central and Eastern Europe," WIDER Working Paper Series RP2005-43, World Institute for Development Economic Research (UNU-WIDER).
    14. Falk Bräuning & Viacheslav Sheremirov, 2023. "The Transmission Mechanisms of International Business Cycles: International Trade and the Foreign Effects of US Monetary Policy," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 300-325, March.
    15. Serge Jeanneau & Marian Micu, 2002. "Determinants of international bank lending to emerging market countries," BIS Working Papers 112, Bank for International Settlements.
    16. Montalbano, Pierluigi, 2011. "Trade Openness and Developing Countries' Vulnerability: Concepts, Misconceptions, and Directions for Research," World Development, Elsevier, vol. 39(9), pages 1489-1502, September.
    17. Van Rijckeghem, Caroline & Weder, Beatrice, 2003. "Spillovers through banking centers: a panel data analysis of bank flows," Journal of International Money and Finance, Elsevier, vol. 22(4), pages 483-509, August.
    18. T. J. Brailsford & J. H. W. Penm & R. D. Terrell, 2006. "An Analysis Of Asian Market Integration Pre- And Post-Crisis," International Journal of Theoretical and Applied Finance (IJTAF), World Scientific Publishing Co. Pte. Ltd., vol. 9(04), pages 483-501.
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    20. Demirer, Riza & Omay, Tolga & Yuksel, Asli & Yuksel, Aydin, 2018. "Global risk aversion and emerging market return comovements," Economics Letters, Elsevier, vol. 173(C), pages 118-121.

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