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AsiaÕs Rebalancing and Growth

Author

Listed:
  • Soyoung Kim
  • Jong-Wha Lee
  • Warwick J. McKibbin

Abstract

The paper investigates the impact of Asia's demand rebalancing and supply-side productivity changes on long-term economic growth in Asia and worldwide. Results from a panel vector autoregression model show that a productivity-neutral demand rebalancing shock has no permanent effect on Asian output, whereas labor productivity shocks have significant, positive, and permanent effects. Simulations using a global intertemporal multi-sector general equilibrium model suggest that labor productivity shocks increase the foreign GDP over time, but rebalancing shocks have a negative international spillover effect. In addition, labor productivity shocks helps rebalancing. Structural reforms promoting labor productivity growth along with rebalancing policies across Asia can achieve higher economic growth worldwide.

Suggested Citation

  • Soyoung Kim & Jong-Wha Lee & Warwick J. McKibbin, 2017. "AsiaÕs Rebalancing and Growth," CAMA Working Papers 2017-66, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2017-66
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    JEL classification:

    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • F47 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Forecasting and Simulation: Models and Applications
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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