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International Monetary Fund

This Selected Issues paper for Indonesia reports that following the major cleanup of the banking sector after the crisis, banks’ performance has improved as net interest margins and profitability have increased. Public and external debt ratios have declined and international reserves have risen, reducing domestic and external vulnerabilities. Indonesia stands out as having experienced a slower recovery in investment and exports than other countries hit by the Asian crisis. Recognizing the challenge, the government has adopted a sound medium-term strategy focused on boosting economic growth.

Mr. Michael Sarel
This study examines the nature of the growth process in the ASEAN countries, and particularly whether it has been generated primarily by more inputs or by productivity gains. It uses internationally comparable data and explores an alternative method for estimating the capital and labor factor shares. The results, contradicting some previous studies, indicate a very impressive growth rate of TFP in Singapore, Thailand, and Malaysia, a relatively strong rate for Indonesia, and a negative rate for the Philippines. This study argues that the results of previous studies were driven mainly by the fact that they relied on national accounts data for measures of various variables and, in particular, the factor income shares of capital and labor.
Mr. Michael Sarel
This paper examines the different arguments raised by the studies that addressed the East Asian growth experience. The original arguments presented in this paper are all on the negative side, highlighting problems associated with some of the possible explanations for the East Asian miracle. The paper concentrates mainly on four dimensions of the debate about the East Asian growth experience: (i) The nature of economic growth intensive or extensive?; (ii) The role of public policy and of selective interventions; (iii) The role of high investment rates and a strong export orientation as possible engines of growth; and (iv) The importance of the initial conditions and their relevance for policy.