The 2008 Financial Crisis and Potential Output in Asia: Impact and Policy Implications
Cyn-Young Park (),
Ruperto Majuca () and
Josef Yap ()
Additional contact information
Ruperto Majuca: Philippine Institute for Development Studies (PIDS), Postal: National Economic Development Authority (NEDA) Bldg., 106 Amorsolo St., Legaspi Village, Makati, Philippines. , Tel. +63 2 893 9585-92, Fax +63 2 810 6261, http://www.pids.gov.ph/
Josef Yap: Philippine Institute for Development Studies (PIDS), Postal: National Economic Development Authority (NEDA) Bldg., 106 Amorsolo St., Legaspi Village, Makati, Philippines. , Tel. +63 2 893 9585-92, Fax +63 2 810 6261, http://www.pids.gov.ph/
No 45, Working Papers on Regional Economic Integration from Asian Development Bank
Abstract:
Monitoring the behavior of potential output helps policymakers implement appropriate policies in response to an economic crisis. In the short-run, estimates of the output gap can guide the timing of the implementation and withdrawal of stimulus measures. In the medium- to long-term, these estimates can also provide the basis for gauging productive potential and, hence, guide policies to support sustainable, non-inflationary output growth. In this paper, we investigate the post-crisis behavior of potential output in emerging East Asian economies by employing the Markov-switching model to account for structural breaks. Results show that after the 1997/98 Asian financial crisis, potential output in Hong Kong, China; the Republic of Korea (Korea); Singapore; and Malaysia reverted to levels consistent with trends prior to the crisis. While there were permanent drops in potential output for both Thailand and Indonesia, growth rates returned to pre-crisis trends. The People’s Republic of China (PRC); Taipei,China; and the Philippines are special cases as explained in the report. Econometric estimates of a simple growth model show that the differences among the patterns of post-crisis recovery can be attributed to the investment-to-gross-domestic-product (GDP) ratio; macroeconomic policies; exchange rate behavior; and productivity, which is proxied by the level of technological activity. These results can be used to guide policy in the aftermath of the 2008 global financial crisis.
Keywords: Potential output; Markov-switching model; structural break; global crisis; East Asia (search for similar items in EconPapers)
JEL-codes: C30 E32 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2010-04-01
References: Add references at CitEc
Citations: View citations in EconPapers (12)
Downloads: (external link)
http://aric.adb.org/pdf/workingpaper/WP45_2008_Financial_Crisis.pdf Full text (application/pdf)
Related works:
Working Paper: The 2008 Financial Crisis and Potential Output in Asia: Impact and Policy Implications (2010) 
Working Paper: The 2008 Financial Crisis and Potential Output in Asia: Impact and Policy Implications (2010) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:ris:adbrei:0045
Access Statistics for this paper
More papers in Working Papers on Regional Economic Integration from Asian Development Bank Contact information at EDIRC.
Bibliographic data for series maintained by Ivan B. de Leon ().