Asia Economics Blog

The mechanisms by which research findings are disseminated and gain influence are changing. Yet the metrics by which we assess scholarly contribution are lodged in the past, particularly among universities and research institutions in Asia. Looking ahead, the rapid pace of growth in economic research in this region affords an opening to move smartly to new ways of sharing work and recognizing achievement.

Larry Summers put his finger on the transformation in a talk at the Peterson Institute (7:18): “Keynes has a famous line about everything that policymakers say or do is a reflection of a defunct academic scribbler … now everything that a policymaker does is from a blog or a substack ….” Blog posts get a researcher’s message out in succinct form, available at the click of a link and transmissable at lightening speed through social media. Of course, serious research requires more than the thousand or so words of a blog post to fully articulate. The blog post then serves as a promotional vehicle. All the same, in the internet age the full length article need be no less accessible or transmissable than the blog post. Why, then, are most research articles locked behind paywalls erected by corporate publishers, with "staggeringly profitable" Elsevier in particular able to dominate the field? The answer has a lot to do with how universities and research institutions measure and reward accomplishment, allowing profit-oriented corporations to set the terms.

Against the blow of the pandemic, governments worldwide undertook expansionary monetary and fiscal policies. But by 2022, pressure was on to retrench as inflation reared up and government debt-to-GDP ratios mounted.

This post continues a series that applies the framework developed in Macroeconomics for Emerging East Asia (Cambridge University Press, 2022; RePEc) to analyzing monetary and fiscal policy. The series began with a trilogy of posts on the pandemic shock of 2020 and associated fiscal and monetary policy responses. There followed a post for 2021 in which the pandemic continued to figure as the main challenge to macro stability. This post for 2022 finds the pandemic subsiding with attention turning to the disruptive spillover of US monetary tightening and the need to re-establish fiscal sustainability.

Has the world passed peak globalization? The prospect doesn't bode well for Emerging East Asia to pursue trade oriented growth. But a three part series on "The Peak Globalization Myth" by Richard Baldwin on VoxEU suggests that broad generalizations about globalization's demise are premature. Findings are: the timing of any peaking differs by region; falling commodity prices have figured significantly in declining trade values; and the future of globalization lies in trade in intermediate services.

This post analyzes trade patterns at the economy level for East Asia with a focus on intra-regional trade and trade in intermediate services to assess prospects. The upshot is that developing regional supply chains and pursuing comparative advantage in intermediate services may offer promising opportunities.

US interest rate hikes in 2022 have drawn global capital away from the rest of the world to put downward pressure on currency values vis a vis the dollar. To defend their exchange rates, many Asian central banks have sold off reserves. A future post will provide an overview of the situation as data become more broadly available. For Taiwan, data already in hand reveal a surge in capital outflows. For the first half of 2022, net portfolio outflows reached $77 billion versus average full-year magnitudes hovering around $60-80 billion for most of the past decade. Even in the context of a rush of global capital out of emerging markets, the Taiwan case is extreme. Nevertheless, a modest accumulation of official reserves has continued to prevail on the balance of payments.

Updated 2 May 2022 to incorporate full year data for 2021.

A previous post analyzing the economics of the pandemic for 2020 documented widely divergent experiences in Asia with respect to case numbers, mobility loss, and export impact, and showed all three of these factors to be systematically related to GDP growth. A follow-up post on fiscal policy found that those economies with ample fiscal space used it to ramp up spending, and a post on monetary policy showed central bank balance sheets expanding under supportive global conditions. In this post, we revisit the analytics using data for 2021.

Asia's response to the pandemic has rested largely on fiscal policy with monetary policy playing a facilitating role to varying degree. Fiscal policy is the subject of the second post in this series. The first post looks at factors influencing the impact of the pandemic on GDP growth, specifically, infection incidence, mobility loss due to transmission mitigation measures, and export decline.

Asian economies have been hit differently by the pandemic and have responded differently by way of fiscal and monetary policy. The first post in this series traces differences in economic impact to differences in infection incidence, mobility loss due to transmission mitigation measures, and export decline. This post on fiscal policy and the next on monetary policy look at macro policy responses within the context of policy space.

Why have the economies of Asia fared so differently under the pandemic? In 2020, the economy of the Philippines contracted by 9.5 percent and that of India by 8.0 percent. Meanwhile, Bangladesh achieved growth of 3.8 percent, Taiwan 3.1 percent, Vietnam 2.9 percent, and China 2.3 percent.

This post looks at three channels through which the pandemic impacted economic activity: infection incidence; mobility loss due to transmission mitigation measures; and export decline. Subsequent posts consider fiscal and monetary policy responses.

Co-Author: Roberto Meurer

The conclusion of the previous post in this series is that East Asia has worked out a policy routine for managing exchange rates in service to macroeconomic stabilization. For Latin America, by contrast, such a routine is not in evidence.

China has long gotten a bad rap on currency manipulation. The fact is, however, that China is no different from other East Asian economies when it comes to exchange rate management.

The essence of the East Asian model is to steer the exchange rate along a steady long-run course, erring toward undervaluation in the face of uncertainties about the future. Any perception of overvaluation runs

The 'new fiscal consensus' holds that major advanced economies have the fiscal space to go big on stimulus and should do so in response to the pandemic. In a recent webinar sponsored by the Ashoka Centre for Economic Policy in Haryana, India, Olivier Blanchard made the case for the new fiscal consensus and Arvind Subramanian then responded on the relevance for emerging market economies such as India. This post extends elements of their analysis to the major emerging economies of Southeast Asia: Indonesia; Malaysia; the Philippines; Thailand; and Vietnam.

Blanchard explained that to preserve a stable debt/GDP ratio, the following condition must hold:

Cambridge University Press, 2019 (RePEc).

The received image of catch-up growth has developing countries following steadfastly along a path trodden by their predecessors. Keun Lee, professor of economics at Seoul National University and 2014 winner of the Schumpeter Prize, upends that image arguing that if latecomers aim merely to follow in the footsteps of countries that have gone before, they will never catch up. Rather, each country must find its own way to advance based on cutting-edge innovation along ever shifting frontiers.

In the book Capitalism and Inclusion under Weak Institutions, reviewed in a previous post, author Raul Fabella points to a lack of social coherence in the Philippines as undermining economic progress and contrasts this with the Chinese case where "a strong sense of identity and mission" has propelled phenomenal economic growth. Judging by differences in receptivity to the statement "most people can be trusted", Fabella may be onto something. Survey results presented in Figure 1 show 62.7% of Chinese agreeing with this statement versus just 2.8% of Filipinos. Personally, I am mystified by these results having spent many years in both countries and not finding Filipinos any less trustworthy than Chinese. Yet the results do lend credence to Fabella's thesis.

published by the University of the Philippines, Center for Integrative and Development Studies, 2018. pdf download

The lackluster development performance of the Philippines over the span of many decades is routinely blamed on "weak institutions" by Filipinos. In this thought-provoking book, University of the Philippines economics professor and Philippine National Scientist Raul Fabella advises on how to overcome the curse of weak institutions to achieve robust growth with poverty reduction.

When the last global crisis hit in 2008-09, the major economies of East Asia, but for one, had ample fiscal space to respond, and took advantage of that. This time around, the positioning is more mixed and the threat potentially much greater.

In Asia, the shock of the Great Financial Crisis (GFC) was inflicted mainly through export loss and capital flight. Domestic financial systems remained sound and productive capacity intact. A quick shot of fiscal stimulus was just the remedy to tide an economy over until global trade rebounded and financial capital returned. Use of such a strategy shows up in Figure 1 as a sharp increase in the debt-to-GDP ratio in 2009 for Malaysia, China, Vietnam, Thailand, Korea, and Taiwan, with the ratio then declining or stable in 2010. Two countries – the Philippines and Indonesia – saw no increase in their debt ratios in 2009, riding out the crisis without recourse to fiscal stimulus.

The dominant publisher of economics journals suffers from a dearth of women among its top tier editors. The underlying problem is that academics are not making the selections; rather, the choices are made by Elsevier staff who do not read the journals they manage or appreciate how those journals distinguish themselves. They thus rely on superficial criteria and succumb to subjective biases on gender in picking editors. 

This post follows up on my review of Tom Orlik's wonderful book "China: The Bubble that Never Pops". The book explains why constant predictions of China's economic collapse due to mounting debt and financial risk have not been borne out, and the explanation is altogether compelling. My one quibble with the book regards Orlik's view of the underlying driver of the saving/consumption imbalances that motivated debt driven stimulus. Orlik emphasizes China's one-child policy as the source of the imbalances, going so far as to call it China's original sin in an interview. The argument is that with China's weak social welfare system, having only one child makes for insecurity about old age that induces parents to save more during their working years. I'm not convinced that this holds up as a reason for China's imbalances. Let me hasten to add that, regardless, the book's original contribution in explaining why no crash has occurred holds up very well. The source of the imbalances is a separate issue, but one worth pursuing in its own right.

There is a sense in which I agree that the one-child policy has been a factor in China's high saving. The exceptionally sharp decline in the birth rate in China's case accentuated the demographic transition that is common among countries during economic development. A couple of decades on, the drop in the birth rate brings a bulging labor force relative to a shrinking share of old and young age dependents in the population. Per the life cycle hypothesis of Modigliani (1970), saving is done by those in their working years who generate income whereas the young and old consume without producing any income from which to save. The decline in China's dependent share was particularly steep in the 2000-aughts and relatedly, so was the rise in the saving rate, as shown by Bonham and Wiemer (2013). So while the one-child policy mattered, it did not matter until two decades after it was introduced and not because it prompted precautionary saving to provide security in old age but because of the long-run demographic forces it intensified.

Oxford University Press, May 2020.

As much as China's crash has been predicted, someone needed to explain why it hasn't happened. And no one could be more credible in doing so than Tom Orlik who has reported insightfully on China since 2011, first with the Wall Street Journal, then with Bloomberg where he is now Chief Economist. 

Starting a new journal has never been easy, but in recent years it has gotten very much harder. This is the sad reality the American Committee on Asian Economic Studies (ACAES) came up against in its own quest following loss of the Journal of Asian Economics to a takeover by Elsevier (see previous post). Start-up is inherently difficult simply because reputation is so crucial to attracting submissions, and reputation takes a long time to establish. But start-up has of late become even more difficult because the journal publishing industry is caught in a state of limbo between an old model that relies on selling subscriptions to libraries and a new model that features open access with the business angle of that yet to be worked out. The dominant player in journal publishing and its major customers have squared off and failed to come to terms.

The dominant player by far in journal publishing is Elsevier. As the first post in this series documents, Elsevier's share of articles published in the top 200 economics journals was an overbearing 58.6% for the last decade. Elsevier has exploited its market power to the point that such major customers as the University of California and the Massachusetts Institute of Technology have finally halted negotiations and canceled their subscriptions. UC broke off negotiations in January 2019 (its struggles chronicled here). More recently, on June 11, MIT announced it was following suit. Many European universities have also taken a stand, organizing their resistance by country. In particular, a consortium of German universities canceled subscriptions in January 2017. At times, boycotts have also been staged in Taiwan and Korea.

Loss of the Journal of Asian Economics to a takeover by Elsevier and less than encouraging responses from other publishers to inquiries about starting a new journal prompt these remarks. Why did the model of an academic society choosing editors, setting a vision, and developing content stop working for Elsevier? And is there a future for such a model?

The Journal of Asian Economics was founded in 1990 by the American Committee on Asian Economic Studies. During its 30 year run under ACAES auspices, the Journal was helmed by three Editors-in-Chief: founder Manoranjan Dutta (1990-2007); Michael Plummer (2007-2015); and myself (2015 to the June 2020 issue). The Editor-in-Chief served concurrently as President of ACAES with endorsement by the organization's voting members.