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Euro zone debt crisis: Scenario analysis and implications for developing Asia-Pacific

Author

Listed:
  • Sudip Ranjan Basu

    () (Macroeconomic Policy and Financing for Development Division, ESCAP)

  • Clovis Freire

    () (Macroeconomic Policy and Financing for Development Division, ESCAP)

  • Pisit Puapan

    () (Ministry of Finance, Thailand)

  • Vatcharin Sirimaneetham

    () (Macroeconomic Policy and Financing for Development Division, ESCAP)

  • Yusuke Tateno

    () (Macroeconomic Policy and Financing for Development Division, ESCAP)

Abstract

The ongoing euro zone debt crisis creates an undesirable scenario for the global economy as well as for the Asia-Pacific region given that the region has close economic linkages. The paper aims to provide quantitative estimates of the potential impact of the euro zone debt crisis on merchandise exports as well as on economic growth and poverty reduction efforts in the region. The results indicate that a one-percentage-point fall of output growth of the euro zone would result in a total export loss of $166 billion. In addition, the protectionist threats could further increase the loss in exports by $27 billion. On social development, the disorderly euro zone debt crisis scenario would prevent 8.19 million people to get out of poverty and another 1.15 million would be pushed back into poverty as per the $1.25-a-day poverty line. The paper illustrates that macroeconomic policy space appears adequate in most economies that tend to be more heavily affected by the euro zone debt crisis. But strong inflationary pressures and less favourable public debt conditions could prevent some economies from implementing swift and forceful macroeconomic policy responses.

Suggested Citation

  • Sudip Ranjan Basu & Clovis Freire & Pisit Puapan & Vatcharin Sirimaneetham & Yusuke Tateno, 2012. "Euro zone debt crisis: Scenario analysis and implications for developing Asia-Pacific," MPDD Working Paper Series WP/12/03, United Nations Economic and Social Commission for Asia and the Pacific (ESCAP).
  • Handle: RePEc:unt:wpmpdd:wp/12/03
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Euro zone; Debt crisis; Growth; Inflation; Exports; Protectionism; Poverty reduction; Policy space;

    JEL classification:

    • N14 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - Europe: 1913-
    • H63 - Public Economics - - National Budget, Deficit, and Debt - - - Debt; Debt Management; Sovereign Debt
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • I32 - Health, Education, and Welfare - - Welfare, Well-Being, and Poverty - - - Measurement and Analysis of Poverty
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy

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