Asia's rebalancing and growth

Soyoung Kim, Jong-Wha Lee, Warwick McKibbin

    Research output: Contribution to journalArticle

    Abstract

    The paper investigates the impact of Asia's demand rebalancing and supply-side productivity changes on long-term economic growth in Asia and worldwide. Results from a panel vector autoregression model show that a productivity-neutral demand-rebalancing shock has no permanent effect on Asian output, whereas labour productivity shocks have significant, positive and permanent effects. Simulations using a global intertemporal multisector general equilibrium model suggest that labour productivity shocks increase the foreign GDP over time, but rebalancing shocks have a negative international spillover effect. In addition, labour productivity shocks help in rebalancing. Structural reforms promoting labour productivity growth along with rebalancing policies across Asia can achieve higher economic growth worldwide.
    Original languageEnglish
    Pages (from-to)2709–2731
    JournalThe World Economy
    Volume41
    DOIs
    Publication statusPublished - 2018

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