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International Monetary Fund. Asia and Pacific Dept

Abstract

Asia and Pacific’s position as the growth engine of the world economy has intensified in recent years. While in 2000 the region accounted for less than 30 percent of world output, by 2014 this contribution had risen to almost 40 percent. Moreover, Asia and Pacific accounted for nearly two-thirds of global growth last year. Developments in the region are therefore central to the global economic outlook and for formulating policies around the world. What, then, are Asia and Pacific’s near- and medium-term growth prospects? Will substantial intraregional differences in growth persist? How have vulnerabilities within the region evolved? What macroeconomic, financial, and structural policies are appropriate to ensure a dynamic and resilient Asia and Pacific economic region? This chapter addresses these questions, beginning from the broader perspective of the global backdrop and associated risks, as reflected in the April 2015 World Economic Outlook (WEO).

International Monetary Fund. Asia and Pacific Dept

Abstract

Over the past 30 years, the growing technological complexity of products, trade liberalization, and lower transportation and communications costs have reshaped the landscape of global trade. In particular, production has become increasingly fragmented through the growing prevalence of global value chains (GVCs), with components crossing numerous international borders. This has resulted in faster growth of trade in intermediate inputs than of trade in final goods. Asia has especially exemplified this new pattern of production: during 1995–2013, the region’s trade in intermediate goods grew by a factor of six, while trade in final goods grew almost four times. This compares with fourfold and threefold increases, respectively, in the rest of the world.

International Monetary Fund. Asia and Pacific Dept

Abstract

Since the Asian financial crisis, Asian policymakers have encouraged greater financial cooperation and integration within the region. Important steps taken include regional liquidity support arrangements through the Chiang Mai Initiative Multilateralization, the Asian Bond Fund, the Asian Bond Market Initiative, and financial forums such as the Association of Southeast Asian Nations Plus Three and the Executives’ Meeting of East Asia—Pacific Central Banks.1 The Association of Southeast Asian Nations (ASEAN) has also outlined plans to foster capital market integration, including by building capital market infrastructure and harmonizing regulations (Almekinders and others 2015).2

International Monetary Fund. European Dept.

This Selected Issues paper focuses on the Baltic model, Baltic–Nordic links, and convergence. The Baltic countries form a distinct group within a tightly integrated Nordic–Baltic region. They are following similar approaches to economic policy, broadly in line with those of Northern European and the Anglo-Saxon countries. Their macroeconomic policies are generally robust. The paper examines the possible causes of the creditless recoveries in the Baltic countries. It characterizes their experience in comparison with other episodes of creditless recoveries in both advanced and emerging market economies, and also investigates demand and supply constraints to credit expansion in the Baltics.

International Monetary Fund. External Relations Dept.

One of the main points of contention surrounding globalization is whether the flow of technology, skills, culture, ideas, news, information, entertainment, and people across borders consigns many parts of the world to grinding poverty. On February 18, Jagdish Bhagwati (Professor, Columbia University), in discussing his new book, In Defense of Globalization, took on the skeptics, arguing that, when properly managed, globalization is the most powerful force for social good in the world today. The venue was an IMF Economic Forum moderated by Raghuram Rajan (Economic Counsellor and Director of the IMF’s Research Department) and with commentary by Daniel Yergin (Chair, Cambridge Energy Research Associates and author of The Commanding Heights: The Battle for the World Economy).

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

This study provides a candid, systematic, and critical review of recent evidence on this complex subject. Based on a review of the literature and some new empirical evidence, it finds that (1) in spite of an apparently strong theoretical presumption, it is difficult to detect a strong and robust causal relationship between financial integration and economic growth; (2) contrary to theoretical predictions, financial integration appears to be associated with increases in consumption volatility (both in absolute terms and relative to income volatility) in many developing countries; and (3) there appear to be threshold effects in both of these relationships, which may be related to absorptive capacity. Some recent evidence suggests that sound macroeconomic frameworks and, in particular, good governance are both quantitatively and qualitatively important in affecting developing countries’ experiences with financial globalization.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

This study provides a candid, systematic, and critical review of recent evidence on this complex subject. Based on a review of the literature and some new empirical evidence, it finds that (1) in spite of an apparently strong theoretical presumption, it is difficult to detect a strong and robust causal relationship between financial integration and economic growth; (2) contrary to theoretical predictions, financial integration appears to be associated with increases in consumption volatility (both in absolute terms and relative to income volatility) in many developing countries; and (3) there appear to be threshold effects in both of these relationships, which may be related to absorptive capacity. Some recent evidence suggests that sound macroeconomic frameworks and, in particular, good governance are both quantitatively and qualitatively important in affecting developing countries’ experiences with financial globalization.

Zia Qureshi

Greater integration of developing countries into the global economy will present some difficult challenges but is well worth pursuing. Industrial and developing countries alike stand to gain significantly.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

The recent wave of financial globalization that has occurred since the mid-1980s has been marked by a surge in capital flows among industrial countries and, more notably, between industrial and developing countries. Although capital inflows have been associated with high growth rates in some developing countries, a number of them have also experienced periodic collapses in growth rates and significant financial crises that have had substantial macroeconomic and social costs. As a result, an intense debate has emerged in both academic and policy circles on the effects of financial integration on developing economies. But much of the debate has been based on only casual and limited empirical evidence.

Mr. Ayhan Kose, Mr. Kenneth Rogoff, Mr. Eswar S Prasad, and Shang-Jin Wei

Abstract

Measures of de jure restrictions on capital flows and actual capital flows across national borders are two indicators of the extent of a country’s financial integration with the global economy. Understanding the differences between them is important when evaluating the effects of financial integration. By either measure, developing countries’ financial linkages with the global economy have risen in recent years.1 A relatively small group of developing countries, however, has garnered the lion’s share of private capital flows from industrial to developing countries, which surged in the 1990s. Structural factors, including demographic shifts in industrial countries, are likely to provide an impetus to these North-South flows over the medium and long terms.