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Macroeconomic Risks in the Greater Mekong Sub-Region: Perspectives of External Balance and Monetary Policy

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  • Hiroyuki Taguchi

    (Faculty of Economics, Saitama University, Saitama, Japan)

Abstract

This paper investigated the macroeconomic risks in the Greater Mekong Sub-region (GMS) from the perspectives of their external balances and monetary policies. The main findings are: 1) especially in Vietnam, the continuous deficit in current account accompanied with the decline in financial-account surplus and foreign reserves has increased economic risks in external balance, which seems to be a quite similar picture to the pre-crisis (1996-97) Thailand; 2) the rising real exchange rate, i.e. the loss of price competitiveness caused by domestic high inflation has been deteriorating the current account, except for Thailand; 3) the domestic high inflation can be attributed to the inability for central bank to manage monetary base against external capital flows through the sterilization, except for Thailand; 4) the clear contrast between the resilience of monetary policy to capital-flow shock in Thailand in 2000-2011 and its fragility in Vietnam in 2000-2011 and Thailand in 1986-1996, was also identified by the impulse response estimation in the analytical framework of VAR model.

Suggested Citation

  • Hiroyuki Taguchi, 2015. "Macroeconomic Risks in the Greater Mekong Sub-Region: Perspectives of External Balance and Monetary Policy," International Journal of Asian Business and Information Management (IJABIM), IGI Global, vol. 6(2), pages 16-32, April.
    • Handle: RePEc:igg:jabim0:v:6:y:2015:i:2:p:16-32
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