Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

Kumakura Masanaga

No 34, IDE Discussion Papers from Institute of Developing Economies, Japan External Trade Organization(JETRO)

Abstract: Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

Keywords: Electronics cycle; Export competition; Renminbi; Yen/dollar exchange rate; Electronics; International trade; Foreign exchange; East Asia; Southeast Asia; エレクトロニクス; 貿易; 外国為替; 東アジア; 東南アジア (search for similar items in EconPapers)
JEL-codes: F14 F15 F33 (search for similar items in EconPapers)
Date: 2005-08-01
New Economics Papers: this item is included in nep-cba, nep-ifn, nep-int, nep-mon and nep-sea
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Citations: View citations in EconPapers (2)

Published in IDE Discussion Paper = IDE Discussion Paper, No. 34. 2005-08-01

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