Openness and Economic Performance: A Comparative Study of China and the Asian NIEs

Being the world's largest developing economy, China's successful economic performance since 1978 has had a powerful impact on the global economy. Its open policy features an evolutionary process, involving the gradual liberalization of foreign exchange, international trade and foreign direct investments. This paper evaluates how this evolutionary process has contributed to China's economic success in comparison with the development experiences of the Asian newly industrialized economies (NIEs). It concludes that despite the economic crisis in 1997–98, China and the NIEs represent a successful development model, which is built upon openness and huge investments in physical and human capital.     

On the Structure,Dynamics, and Use of the Asset Share in the National Wealth

In this article, the share of assets in the national wealth is taken as the object of analysis and forecast. The dynamics, structure and use of the basic elements of Russia’s productive assets—natural capital (energy inputs), human capital, and active fixed assets—are analyzed. It is shown that the natural capital will inevitably be replaced by human capital in combination with the asset share in fixed capital, and that the economy in the coming transition period (2018–2030) will necessarily transform to an innovative growth model.The annual balances of changes in the components of the assets in the national wealth for 2012–2016 are developed. The impact of the crisis is estimated. Some promising directions for using the accumulated human capital together with the asset share in fixed capital for a transition from a resource-based to an innovation model of Russia’s development are considered and substantiated.     

International monetary transmission in East Asia: Floaters,non-floaters,and capital controls

This paper analyzes the impacts of the United States (US) monetary shocks on East Asian countries using structural vector-autoregression (VAR) model. We find that the impacts of the US monetary shocks on East Asian domestic interest rates and exchange rates contradict conventional wisdom. The conventional exchange rate channel is unlikely to play much role in the transmission of the US monetary policy shocks to floaters in East Asian countries, excluding Japan. In these countries, the domestic interest rates respond strongly to the US interest rate changes, by giving up monetary autonomy, probably because of fear of floating. However, the domestic interest rate does not respond much in countries with fixed exchange rate regimes and capital account restrictions, such as China and Malaysia. This may suggest that the countries with fixed exchange rate regimes enjoy a higher degree of monetary autonomy, most likely with the help of capital account restrictions.     

An introduction to problems of economic development in the CMEA countries

Through the Asian financial crisis, many key international economic issues have come to the forefront the stability of the international financial system under the IMF, “Asian values”, the universal validity of the Asian Economic Development Model, China's leadership in the regional world economy, Japan's role in the region, and the immunity of Greater China from the current financial crisis. Currently, most Asian countries seem eager to redress structural problems involving the government sector, banking, and corporate governance. In the process of this full scale restructuring, Korea must reevaluate its economic relationship with Central Asia. This paper argues that Korean financial crisis stems basically from the system failure. Furthermore, since a small open economy carries with it intrinsic vulnerabilities, the government should be more careful in securing optimal foreign exchange, opening capital markets based on the economy's absorption capacity. In this respect, the banking industry should be run based on the profitability of capital. Once banking industries are distorted by the practice of government‐led policy loans, it is more difficult to correct those customized distortions. The banking industry should play a larger role as the “brain of the economy”, sensing abnormalities of the economy. Moreover, in today's increasingly interdependent global economic system, no single country can solve its problems without close coordination of its policy with the outside world. An early warning system to signal financial instability would help developing economies in modernizing and strengthening their domestic financial institutions and would also work as a supplement to the IMF standby fund. Also, human resource management has proven too important to be neglected. Central Asia could derive lessons from the above Asian “failure”, not the Asian “miracle”, to avoid inappropriate policies and to deepen its economic development.     

Economic growth and the return to capital in developing economies

An important stylized fact of economic growth is that the rateof return to capital is relatively constant across countriesand over time. This paper provides an explanation using a modelof growth for a developing economy that has a dualistic structure.Three conditions are derived, each of which may account forthe observed stability of the return to capital. The resultsaddress Lucas' criticism of conventional growth models and supportrecent growth accounting studies of East Asian economies, whichemphasize the role of increased factor inputs.     

Regional Trade Agreements in East Asia: Will They Be Sustainable?*

By assessing the sustainability of regional trade agreements (RTAs) for East Asia, we quantitatively evaluate the likely impact of proposed East Asian RTA strategies on the East Asian economies and the world economy with respect to consumption, production, volume of trade and terms of trade effects by applying a multi‐country and multi‐sector computable general equilibrium model. These strategies include: (i) the ASEAN Free Trade Area (AFTA: a being‐left‐alone strategy); (ii) an ASEAN Hub RTA (a hub‐and‐spoke type of overlapping RTA strategy); (iii) the AFTA versus a China–Japan–Korea RTA (a duplicating or competing RTA strategy); and (iv) an ASEAN+3 RTA (an expansionary RTA strategy). We find that an expansionary ASEAN+3 RTA could be a sustainable policy option because the members’ gains would be significantly positive, with more equitably distributed gains between members than when using other strategies. The effect on world welfare would also be positive and the negative effect on nonmembers would not be very strong. More interestingly, if the East Asian countries cooperate with Pacific Basin countries to form an APEC‐level RTA, such as a free trade area of the Asia‐Pacific, the extension of the regional trade bloc might be considered a more desirable policy option than the proposed East Asian RTAs for East Asian economies, even though countries excluded from the free trade area of the Asia Pacific are worse off.     

Memories of colonial law: The inheritance of human capital and the location of joint ventures in early-reform China

Using a unique data set of Chinese foreign direct investment (FDI) contracts from the 1980s and early 1990s, we explore those mechanisms of historical persistence resulting from China's unique colonial experience. Adopting difference-in-differences as well as difference-in-difference-in-differences analysis within conditional logit, we provide evidence that foreign investors favored locating FDI in Chinese cities in which their home country had a colony in the 19th century and that a human-capital channel best explains this persistent impact of colonial experience. While alternative explanations for long-term persistence are not consistent with the empirical findings, the results suggest that legal human capital inherited from colonial times affected economic decisions after 1978. Thus, we attempt to advance the literature on history's long-lasting influence by proposing one particular mechanism of persistence—memory of legal institutions, or inheritance of legal human capital.     

The Asian crisis: what did we learn and when did we learn it?

This paper steps back from the detail of the Asian crisis, to ask whether the 1997 crisis advanced our broad understanding of the age‐old problem of economic crises. Some immediate lessons were learned from the failures of the crisis‐response in Indonesia, which was the worst‐affected economy. It is notable, however, how little changed to address the ongoing systemic weaknesses. Three areas of unresolved vulnerability can be identified. First, the sudden stops and reversals of international capital flows. Second, the intrinsic fragility of a financial system that borrows short and lends long. Third, unanchored exchange rates, where the market's price‐discovery can take the rate to levels far from equilibrium, for sustained periods. For more than a decade after the Asian crisis, international capital flows continued to be seen as unambiguously beneficial, with any attempts at capital flow management rejected. At a global level, it was not until the 2008 financial crisis that widespread financial fragility was addressed through tighter regulation and higher capital requirements. On exchange rates, misleading advocacy of corner solutions—either pure floating exchange rates or immutable fixed rates—continued in the face of the real‐world experience that sometimes intervention is needed to maintain an exchange rate close to equilibrium.     

A comparison of Latin American and African economic development with an East Asian twist

There are many parallels between the development of Latin America and Sub‐Saharan Africa. Recent literature on this is reviewed. It is argued in the paper that the key to long‐term development is the shift from inward (import substitution) to outward (export‐oriented) growth. This shift involves both tariff reduction and significant investment in infrastructure and human capital accumulation. Given that much of Latin America (historically) and Sub‐Saharan Africa (currently) has depended or depends on trade taxes for revenue, an outward orientation poses a significant fiscal problem, which makes it extremely difficult to switch to an export‐oriented growth path. East Asian experience points to the importance of broad‐based agricultural growth in making the fiscal transition.     

北部湾(广西)经济区引进外资金融机构探讨

广西区政府在2006年3月做出了加快北部湾(广西)经济区开放开发的重大战略决策,该地区是"中国——东盟博览会"永久举办地——南宁市的所在地,与东盟各国毗邻,水路、陆路和航空交通十分便利,有着得天独厚的地缘优势,但是随着该地区经济发展的加速,对金融支持的需求量越来越大,同时为了提高本地区的金融环境服务水平,很有必要引进外资金融机构进驻。本文在分析目前广西引进外资金融机构存在不足的基础上,探讨一些有利于加快本地区引进外资金融机构的建议。     

CAPITAL MOBILITY IN SUB-SAHARAN AFRICA: A PANEL DATA APPROACH

In this paper we are primarily concerned with assessing the degree of capital mobility in sub‐Saharan Africa. Using the methodology as proposed by Feldstein and Horioka (1980)—later termed the “Feldstein‐Horioka puzzle”—we test the hypothesis of perfect capital mobility against the alternative of imperfect capital mobility. Following Vamvakidis and Wacziarg (1998) and Isaksson (2000), provision is made in our model to show the dependency of the lesserdeveloped countries on international finance and aid and how a more open economy contributes towards improving the level of capital movement in these countries. We also assess the change in the degree of capital mobility over the time period in an effort to see whether institutional and political changes have been successful. We show that, compared to the region, South Africa is, to a large extent, more developed and should therefore play a leading role in the “African Renaissance”. Stationary panel data estimation techniques are applied to a sample of 36 sub‐Saharan African countries over the time period 1980–2000. The benefits of using one‐way error component models are derived from simultaneously employing time and cross‐section dimensions of the data, resulting in a substantial increase in the degrees of freedom. The fixed and random effects models enable us to acknowledge country heterogeneity within the panel, making provision for differences across countries like capital control policies, financial and capital market structures and exchange rate regimes.     

Substituting and Complementing Models of Economic Development in East Asia

This paper assesses the relative merits and demerits of different East Asian models by placing them in a historical perspective. It re-interprets Gerschenkron's model of late industrialization, and extends it to compare East Asian economies in view of substituting and complementing models. It then explains divergent performances among East Asian economies from the late 1990s by examining the different challenges they faced as their economies became mature and more fully open to forces of globalization. In conclusion, the paper discusses the applicability of the East Asian models for today's developing countries.     

Can the East Asian model of development be generalized?

Export-led growth has become increasingly popular among analysts (and some governments) as a development strategy. Besides contrasting its virtues to the distortions of the import substitution model popular through the 1960s, advocates of the model frequently illustrate its merits by pointing to the remarkable success of its most prominent practitioners, the East Asian ‘Gang of Four’ (Hong Kong, Korea, Singapore and Taiwan). This study explores a possible limitation of the model, known as the fallacy of composition: while the model may work well if pursued by a limited number of countries, it may break down if a large majority of developing countries seeks to pursue it at the same time, because the resulting outpouring of manufactured exports might be more than Western markets could absorb. Protectionist response might be the result of attempts to generalize the East Asian export model of growth.     

Ties Binding Asia,Europe and the USA

We investigate changes in Asia's regional and global trade linkages and their influence on macroeconomic relationships among Asia, Europe and the USA. We first document changes in tripartite trade patterns and discuss stylized facts about East Asia's trade structure, with particular focus on the role of China. China plays a critical role in the rapidly expanding intra‐Asian trade as an assembly and production center that supplies final goods for the advanced economies. However, China's trade shares in final goods with East Asia and in parts and components with Europe and the USA are rising, suggesting that the region's production chains are becoming increasingly integrated into the global business network. Empirical results from a panel vector autoregression model generally confirm increasingly mutual macroeconomic interdependence among East Asia, Europe and the USA. The findings suggest a future role for Asia as an important trade partner and balancing power in the world economy.     

East and South Asia: Managing Difficult Bilateral Relations and Regional Integration Globally

This paper analyzes the economic integration of the East and South Asian economies in the global economy. East Asian economies are shown to be achieving much more of their potential trade than South Asian economies, both in terms of intra‐regional trade and in trade with the rest of the world. Examination of the China–Japan, India–Pakistan and Taiwan–mainland China bilateral relationships shows that integration of these economies into the global economy has allowed economic relations to dominate and constrain difficult bilateral political relations in East Asia while in South Asia adverse political relations have hampered development of bilateral economic relationships.     

Financing investment in East Asia: Regional or global savings?

This paper investigates the extent to which domestic investment in East Asian countries is financed by domestic, (East Asian) regional and global savings in order to infer the relative importance of regional vs. global capital markets in East Asia. Panel regression results show that regional saving in East Asia plays a much more important role than global saving in financing investment in the region. The results suggest that global capital flows, despite its huge volume in East Asia, does not contribute to proper investment financing. The results also show that Japanese saving has significant effects on regional investment but Chinese saving does not.     

Efficiency change and productivity growth in agriculture: A comparative analysis for selected East Asian economies

This study focuses on identifying the sources of agricultural growth for eight East Asian economies – with special emphasis on factors that can better explain different components of growth. The Malmquist productivity growth index and its two components are calculated and regressed on variables including the human capital endowment, domestic R&D, international spillovers, and country-specific farming characteristics to characterize the differential patterns of growth. Our empirical evidence suggests that domestic R&D and its interaction with human capital constitute the major determinant of individual economy's progress in agricultural technology, whereas the human capital endowment is crucial for the catching up effect. Furthermore, for foreign knowledge to contribute to productivity growth either through innovation or through catching up, the host economy has to develop a sufficient learning capacity from education. Countries that do not attempt to develop the learning capability to assimilate and exploit the freely available knowledge may not benefit from international spillovers of agricultural R&D.     

Were capital flows the culprit in the Weimar economic crisis?

This paper examines the role of capital flows in the interwar German economy. We use a calibrated model of sudden stops as our analytical framework and derive four key findings. First, capital flows aggravated the boom–bust cycle of the Weimar economy. Second, these flows were strongly associated—during different periods—with reparations, conditions in the US capital market, and German domestic events. Third, capital flows before 1930 allowed Germany to pay reparations on credit and thus postponed the hour of reckoning when that debt had to be serviced using trade surpluses. Fourth, the German economic downturn in 1931 was due more to capital flows than to productivity shocks or reparations.     

Lessons from the euro zone for the East Asian economies

This paper endeavors to contribute to the solution of the following critical issues: (1) what the East Asian nations can do in cooperation among themselves and with China, Japan, and South Korea in their foreign trade arrangements to improve the stability and growth of their economies; (2) what they must do individually to get their financial and real economies better integrated; (3) what they can do in cooperation with China, Japan and South Korea—bilaterally and regionally—to modernize their monetary systems and to render them more resilient to financial crises; and (4) what new focus of the IMF is most likely to enable the East Asian nations to maintain relatively free and open economies without the impact of catastrophic financial crises. Lessons from the development of the European Union, the dynamics of the euro zone, the experience of the Bank for International Settlements, and recent research on monetary and international macroeconomic theory are drawn upon to provide answers to these questions. It is argued that an area-wide approach, with a new IMF regional role and the formation of an East Asian Monetary Authority, would contribute to a sense of “community” within East Asia, leading to an enhanced role for both East Asia and ASEAN + 3 in the new world economic order.     

Prospects for East Asian economic regionalism in the 21st century

It is not likely that East Asian states will regress to the mercantilist developmental state that used to engineer compressed economic growth. However, it is evident that the pattern of transformation East Asian states are undergoing, is not analogous to the path of Anglo‐American development Although the government refrains itself from arbitrarily supplying economic resources (especially financial resources in the form of subsidies or policy loans) to promote strategic industries, it does not give up commanding the market to attain a relatively higher economic growth. The relationship between the state and the market is still set up in a hierarchical fashion in favor of the former. The economic system to emerge in East Asia is the state‐governed rather than market‐centered, even if it has absorbed neo‐liberal condiments. The state‐dominant economic system of East Asia is expected to survive for a considerable period. In this regard, the establishment of a financial system to sustain the East Asian economic system has been strongly suggested. Here lies in the reason we discuss the rise of the East Asian economic identity in the post‐financial crisis era.