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151. Rapid Economic Growth in China: Implications for the World Economy

Author:
Warwick McKibbin and Yiping Huang
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
Rapid growth of the Chinese economy in the past decade and its potential for strong growth into the foreseeable future have caused anxieties in the rest of the world. Some commentators see Chinese growth wholly in terms of competition for trade and investment opportunities with other developing economies and a major cause of structural adjustments in the advanced industrialized economies. In particular there have been warnings of severe consequences for international agricultural markets. In this paper we use a dynamic general equilibrium model called the G-CUBED model (developed by McKibbin and Wilcoxen) to explore possible future paths of the Chinese economy based on projections of population growth, sectoral productivity growth, energy efficiency and technical change in the Chinese economy. This model captures not only the composition of the direct trade impacts of developments in the Chinese economy but also the implications of the endogenous flows of financial capital on macroeconomic adjustment in the world economy. The study focuses on the period from 1990 to 2020. Rather than being a problem for the world economy, we find strong growth in China is beneficial for the world economy directly through raising world incomes.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

152. The Transmission of Productivity and Investment Shocks in the Asia Pacific Region

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
An important aspect of macroeconomic interdependence in the Asia Pacific region is the adjustment of trade and current account balances in response to changes in saving and investment rates in individual economies. Greater trade flows, reliance on imported intermediate goods as well as more integrated capital markets imply that shifts in private or public saving and investment rates in an economy in the region can potentially have large impacts on other economies. This paper explores the quantitative nature of these linkages by focusing on a number of shocks within the context of a new dynamic multi-sector global model called the Asia-Pacific G-Cubed Model (AP-GCUBED). This model integrates sectoral adjustment with macroeconomic interdependence including explicit treatment of capital flows to explore the implications of a variety of productivity and investment shocks in the Asia Pacific Region. The first shock considered is a permanent decline in private investment in Japan. The second shock is a temporary rise in total factor productivity growth in China. The fall in Japanese investment is found to have a significant effect on trade flows and financial flows in the region whereas the rise in Chinese productivity has a quite different effect on the region.
Topic:
Economics, Emerging Markets, and Globalization
Political Geography:
China, Israel, East Asia, and Asia

153. North Korea: How Much Reform and Whose Characteristics?

Author:
Heather Smith
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
This paper is the first of a three part project on economic reform on the Korean Peninsula. In this first paper, I focus on the question which has been subject to considerable recent debate, namely whether collapse of North Korea is imminent. In accessing this question the paper discusses the three structural bottlenecks now thought to be severely constraining the North Korean economy following a series of external shocks in the late 1980s, food shortages, energy constraints and a limited capacity to earn foreign exchange. Much speculation has focused on the deterioration in the food economy and that a prolongation of current food shortages will see North Korea collapse. One contribution of this paper lies in its attempt to analyze North Korean agricultural production and food consumption patterns using data made available by North Korea to the United Nations Food and Agricultural Organization. Several anomalies are found between this data and recent World Food Program assessments of food conditions and estimates of nutritional requirements which suggest caution in drawing a too deterministic link between current food shortages and collapse. The paper then discusses the role of international and regional players in prolonging North Korea's economic survival. In particular, the terms under which North Korea signed onto the 1994 Agreed Framework, a return to favorable trading terms with China, and North Korea's attempts aimed at expanding economic ties with the international community, could sustain North Korea at subsistence levels for the next 5 years at least. If collapse is not imminent in the short to medium term, then the policy implications that emerge from such a scenario are clear: that the international community will need to continue to pursue a policy approach of managing tension reduction and the integration of North Korea into the international community. Whether the North Korea regime will embrace fundamental reforms needed to ensure longer term survival remains difficult to judge. In the final section of the paper, several reasons are advanced as to why the window of opportunity for North Korea to embrace reform is now greater than at any time in the past.
Topic:
International Relations and Economics
Political Geography:
Israel and East Asia

154. The Macroeconomic Experience of Japan Since 1990: An Empirical Investigation

Author:
Warwick McKibbin
Publication Date:
12-1999
Content Type:
Working Paper
Institution:
The Brookings Institution
Abstract:
This paper outlines the macroeconomic experience of the Japanese economy since 1990. The MSG2 multi-country model is used to determine the extent to which the strong yen and growth experience of Japan over this period was due to underlying trends in the Japanese economy and to what extent shocks such as changes in the settings of monetary and fiscal policies in Japan and overseas, as well as the Kobe earthquake, played a role. It is shown that many of the key features of the Japanese economy over this period can be attributed to inappropriate macroeconomic policy settings in Japan as well as reflecting long term trends due to population changes and a maturing of the Japanese economy. In particular, it is shown that announcing expansionary fiscal policy in advance of implementation and exaggerating the extent of actual stimulus, tended to appreciate the yen and raise long term real interest rates which further reduced real GDP growth over the period. The extent to which macroeconomic policy rather than entrenched structural problems can explain the experience suggests that future prospects for the Japanese economy are not as bleak as sometimes predicted. Growth is unlikely to return to the high levels experienced in previous decades because of the maturing of the Japanese economy and low future population growth in Japan. This paper projects growth to be sustainable at around 2.5% per year over the next decade and a continual appreciation of the yen in both real and nominal terms.
Topic:
Economics and Political Economy
Political Geography:
Japan, Israel, and East Asia

155. The Nonproliferation Regime under Siege

Author:
George Bunn
Publication Date:
09-1999
Content Type:
Working Paper
Institution:
Center for International Security and Cooperation
Abstract:
The nuclear nonproliferation regime was challenged in 1998 by nuclear-weapon tests in India and Pakistan, by medium-range missile tests in those countries and in Iran and North Korea, by Iraq's defiance of UN Security Council resolutions requiring it to complete its disclosure of efforts to acquire weapons of mass destruction, and by the combination of “loose nukes” and economic collapse in Russia. Additional threats to the regime's vitality came in 1999 from the erosion of American relations with both China and Russia that resulted from NATO's 1999 bombing of Yugoslavia—with additional harm to relations with China resulting from U.S. accusations of Chinese nuclear espionage and Taiwan's announcement that it was a state separate from China despite its earlier acceptance of a U.S.-Chinese “one China” agreement. Major threats to the regime also came from the continued stalemate on arms-control treaties in the Russian Duma and the U.S. Senate, from a change in U.S. policy to favor building a national defense against missile attack, and from a Russian decision to develop a new generation of small tactical nuclear weapons for defense against conventional attack.
Topic:
International Relations, Arms Control and Proliferation, Economics, Government, and Nuclear Weapons
Political Geography:
Pakistan, Russia, United States, China, Europe, Iran, South Asia, Middle East, Israel, East Asia, Asia, and Korea

156. Hong Kong Update: Winter 1999-2000

Author:
Frank Ching, Lee Kuan Yew, George Hui, and Sunny Kai-Sun Kwong
Publication Date:
10-1999
Content Type:
Policy Brief
Institution:
Center for Strategic and International Studies
Abstract:
During my yearly visits to Hong Kong over the last thirty years, I was struck by the upbeat, can-do spirit of its people. However troublesome the situation, such as the noisy demonstrations of the imitators of the Red Guards in 1966 and 1967, or the economic downturn caused by the sudden quadrupling of oil prices in 1973, Hong Kong people were not dismayed or despondent. So when I spent a few days in Hong Kong at the beginning of June this year, I was surprised by its completely different mood. The people I met seemed frustrated at finding themselves in a situation where the solutions were not obvious. Much of the present malaise in Hong Kong arises from the problems of a transition that proved more difficult than expected. In part it was because of the five years of the last governor's policies, aggravated by the Asian financial crisis. Until the territory has come through this transition phase it is not possible to make any long-term forecasts on Hong Kong's future.
Topic:
Civil Society, Economics, Government, and Politics
Political Geography:
Israel and Hong Kong

157. Modeling Korean Unification

Author:
Marcus Noland, Sherman Robinson, and Tao Wang
Publication Date:
07-1999
Content Type:
Working Paper
Institution:
Peterson Institute for International Economics
Abstract:
For North Korea, product market integration would generate large welfare gains, sufficient to end the famine. Additional gains could be had through military demobilization. For the South, the impact of product market integration would be trivial, but the impact of factor market integration would be considerable, affecting the composition of output, distribution of income, and rate of growth.
Topic:
Economics, International Trade and Finance, and Political Economy
Political Geography:
Israel, East Asia, and Korea

158. After the Crisis: The Social Contract and the Middle Class in East Asia

Author:
Nancy Birdsall and Stephan Haggard
Publication Date:
01-1998
Content Type:
Working Paper
Institution:
Carnegie Endowment for International Peace
Abstract:
The Asian financial crisis put in bold relief two big differences between the Asian and the Western economies. One has been hotly contested, while the other has been virtually ignored.
Topic:
Economics and Emerging Markets
Political Geography:
Israel and East Asia

159. The Yen, the Yuan, and the Asian Currency Crisis Changing Fortune between Japan and China

Author:
C.H. Kwan
Publication Date:
12-1998
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
The currency crisis that started in Thailand in the summer of 1997 was followed by repercussions on the currencies of neighboring countries, culminating in a crisis infecting most countries in East Asia. Japan and China, which have developed strong ties with the rest of Asia through trade and investment, have not been exempted from this contagion. This paper looks at the latest currency crisis in Asia from the perspectives of these two regional giants.
Topic:
Economics and International Trade and Finance
Political Geography:
Japan, China, Israel, East Asia, Asia, and Thailand

160. The Korean Currency Crisis: What Can We Learn From It?

Author:
Sang-Mok Suh
Publication Date:
05-1998
Content Type:
Working Paper
Institution:
Walter H. Shorenstein Asia-Pacific Research Center
Abstract:
Just like many other crises, the Korean currency crisis came suddenly. In mid–November 1997, headlines in the Korean press consisted mostly of presidential election stories. At that time the presidential race was very close; the Grand National Party candidate, Lee Hoi–Chang, was making a dramatic comeback, while the National Congress for New Politics candidate, Kim Dae–jung, was making his best effort to maintain his narrow lead. Thus, when President Kim Young Sam announced on November 19 his decision to fire key economic policy–makers on the grounds of mismanaging the economy, most Koreans were surprised at the news and questioned the president's motivation. Two days later they were completely shocked to learn that the Korean government was asking the International Monetary Fund (IMF) for emergency standby loans because the Korean foreign reserve level was very low at $7.3 billion and most foreign financial institutions were unwilling to roll over their short–term loans to Korea.
Topic:
Economics and International Trade and Finance
Political Geography:
Israel, East Asia, and Asia