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International Monetary Fund. Asia and Pacific Dept

Abstract

The main findings of the analysis in this chapter are as follows:

R. B J and V. S

Abstract

The papers in this volume illustrate the structural linkages among different components of financial sector reforms and the impact of these reforms on macroeconomic performance, based on country experiences. An underlying theme throughout the volume is that specific financial sector reforms should be properly sequenced and coordinated in order to complement and support macrostabilization objectives, and to reflect the technical linkages among various components of financial sector reform. An appropriate sequencing of financial sector reforms that supports stabilization can help to derive the full benefits of these reforms in terms of efficiency and growth. The book is therefore concerned with the elements that contribute to orderly liberalizations of financial systems, and with avoiding the pitfalls from inappropriately sequenced or insufficiently supported financial reforms.

International Monetary Fund. Asia and Pacific Dept

Abstract

In the aftermath of the global financial crisis, corporate leverage in emerging Asia has risen and may represent a “fault line.” This fault line is hidden beneath the surface but has the potential to amplify shocks as global liquidity conditions tighten, interest rates rise, and growth slows (Figure 2.1). While the outlook for the region remains solid (Chapter 1), household indebtedness has risen across the region (Box 2.1) as has corporate leverage in the major emerging economies (Figure 2.2). This could weigh on growth as interest rates rise and firms and households enter a deleveraging cycle, cutting both investment and consumption to strengthen their balance sheets. In a worst-case scenario, corporate and household defaults could rise, with adverse effects on bank balance sheets, the availability and price of credit, and growth. Unlike in Emerging Asia, corporate leverage ratios have remained broadly stable or have declined in advanced Asia (Figure 2.2).

International Monetary Fund. Asia and Pacific Dept

Abstract

In recent decades, especially during the 1990s, trade integration within Asia has proceeded faster than in other regions. In valued-added terms, intraregional trade grew on average by over 10 percent a year from 1990 to 2012, twice the pace seen outside of Asia. While Asia’s overall trade openness today does not particularly stand out compared to other regions—partly reflecting the presence of several large, less open economies—the intensity of intraregional trade does stand out, especially within ASEAN. Concomitantly, financial integration within the region—as well as between the region and the rest of the world—has started to catch up, although it still lags behind trade integration.