Asiaâ€™s Post-Global Financial Crisis Adjustment : A Model-Based Dynamic Scenario Analysis
Using a dynamic global general equilibrium model, the paper assesses the short- and medium-term impacts of the global financial crisis on Asian economies and the implications of post-crisis adjustment in emerging East Asia (EEA) for the world economy. The analysis suggests that EEA is unlikely to be severely damaged permanently by the global financial crisis, and a worldwide fiscal stimulus could play an important role in stabilizing the global economy in crisis. EEAâ€™s efforts at strengthening regional demand, in conjunction with adopting a more flexible exchange rate regime, will promote more balanced regional growth and facilitate an orderly global rebalancing. However, despite the growing size of EEA in the global economy, the regionâ€™s growth rebalancing has only modest spillover effects on the rest of the world. EEA can contribute to global growth, but it alone cannot become the sole engine driving post-crisis growth in the world economy.
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