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Journal Article
Inflation, asset markets, and economic stabilization: lessons from Asia
In 1980's, a new convention emerged in the economics profession - that central banks' primary, even sole, responsibility should be controlling consumer price inflation. By the 1990's, this view was gaining credibility in policy circles, and various countries mandated that their central banks make inflation their primary focus (generally with and escape clause in the event of a severe economic shock). Here in the United States, this orthodoxy never gained official status; rather, the U.S. policy goal remains promoting stable long-term growth using a variety of theoretical approaches. ; The ...
Journal Article
Anatomy of a currency crisis
Working Paper
Bad Investments and Missed Opportunities? Postwar Capital Flows to Asia and Latin America
Since 1950, the economies of East Asia grew rapidly but received little international capital, while Latin America received considerable international capital even as their economies stagnated. The literature typically explains the failure of capital to flow to high growth regions as resulting from international capital market imperfections. This paper proposes a broader thesis that country-specific distortions, such as domestic labor and capital market distortions, also impact capital flows. We develop a DSGE model of Asia, Latin America, and the Rest of the World that features an ...
Working Paper
Measuring productivity growth in Asia: do market imperfections matter?
Recent research reports contradictory estimates of productivity growth for the newly industrialized economies (NIEs) of Asia. In particular, estimates using real factor prices find relatively rapid TFP growth; estimates using quantities of inputs and output find relatively low TFP growth. The difference is particularly notable for Singapore, where the difference is about 2-1/4 percentage-points per year. We show that about 2/3 of that difference reflects differences in estimated capital payments. We argue that these differences reflect economically interesting imperfections in output and ...
Conference Paper
Payment and settlement systems in EMEAP economies
Working Paper
Measuring the miracle: market imperfections and Asia's growth experience
The newly industrialized economies (NIEs) of Asia are the fastest-growing economies in the world since 1960. A clear understanding of their rapid development remains elusive, with continuing disputes over the roles of technology growth, capital accumulation, and international trade and investment. We reconcile seemingly contradictory explanations by accounting for imperfections in output and capital markets. For instance, in Singapore, growth-accounting studies using quantities (the primal approach) find rising capital-output ratios and a constant labor share; but studies using real factor ...
Working Paper
Was China the first domino? assessing links between China and the rest of emerging Asia.
We assess links between China and the rest of emerging Asia. Some commentators have argued that China?s apparent devaluation in 1994 may have contributed to the Asian financial crisis. We argue that the devaluation was not economically important: The more-relevant exchange rate was a floating rate that was not devalued, and high Chinese inflation has led to a very sharp real appreciation of the currency. Although in principle, export competition with China could nevertheless have placed pressure on other Asian exporters, we argue that the striking feature of the data is the common movement ...
Working Paper
Asset bubbles, domino effects and 'lifeboats': elements of the East Asian crisis
Credit market imperfections have been blamed for the depth and persistence of the Great Depression in the USA. Could similar mechanisms have played a role in ending the East Asian miracle? After a brief account of the nature of the recent crises, we use a model of highly levered credit-constrained firms due to Kiyotaki and Moore (1997) to explore this question. As applied to land-holding property companies, it predicts greatly amplified responses to financial shocks--like the ending of the land price bubble or the fall of the exchange rate. The initial fall in asset values is followed by the ...