Since the 1980s, emerging countries have been urged to welcome foreign capital inflows. The result has often been a pattern of surges, where excessive inflows were followed by damaging “sudden stops†and reversals. This was dramatically evident in the Asian crisis of...

The Impossible Trinity doctrine still holds a powerful sway over policymakers, advisors (particularly the International Monetary Fund [IMF]) and academia. In East Asia over the past decade, however, most countries have been able to maintain open capital markets, monetary policy...

Since the early 1990s, there is an upsurge in foreign capital flows to developing economies, particularly into emerging markets. One view argues that capital inflows do help to increase efficiency, a better allocation of capital and to fill up the investment-saving gap. Adherents to that view...

Recently, a dramatic accumulation in foreign exchange reserves has been widely observed in developing countries. This paper explores the possible long-run impacts of this trend on macroeconomic variables in developing countries. We analyze a simple open economy model where increased foreign...

The aftermath of the global financial crisis of 2007–2009 has called the export-led growth model of Asian economies into question. This paper describes the contribution that macroeconomic policy can make to promote a rebalancing of growth away from dependence on exports to...

This paper discusses Japan’s strategy for Asian monetary integration. It argues that Japan faces three major policy challenges when promoting intraregional exchange rate stability. First, there must be some convergence of exchange rate regimes in East Asia, and the most realistic option is for...

Financial safety nets in Asia have come a long way since the Asian Financial Crisis (AFC) of 1997–98. Not wanting to rely solely on the International Monetary Fund (IMF) again, the Chiang Mai Initiative (CMI) was created in 2000. When the CMI also proved inadequate following the...

This paper considers how exchange rates affect East Asian trade. The evidence indicates that exports produced within regional production networks depend on exchange rates throughout the region while labor-intensive exports depend on exchange rates in the exporting country. These results make...

Using a dynamic global general equilibrium model, the paper assesses the short- and medium-term impacts of the global financial crisis on Asian economies and the implications of post-crisis adjustment in emerging East Asia (EEA) for the world economy. The analysis suggests that EEA is unlikely...

This paper examines the impact of sectorial reforms on current account imbalances, with a special focus on the People’s Republic of China (PRC). In particular, we investigate to what extent reforms pertaining to the financial sector, social protection, and healthcare may contribute to a...