Abstract
Using three easily measured variables – growth in aggregate output, change in net factor
income and change in national saving – this paper estimates the degree of consumption
smoothing by a group, East Asia. Using the Penn World Tables data for nine East Asian
countries, we provide evidence that about 22 percent of shocks to GDP are smoothed
via a credit market channel while the international capital market is almost insignificant.
Furthermore, we find that around 75 percent of shocks to GDP remain unsmoothed.
Portfolio investment intensity calculations suggest that, of this already small degree of
smoothing achieved by access to international capital markets, a disproportionately
small share is coming from within the region for many countries, although some
countries are achieving a more balanced geographical spread of their portfolio
investments. Given these results, we argue that countries in the region may benefit from
having more open financial systems, which they could use as means of increasing the
consumption risk sharing.
Original language | English |
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Title of host publication | Linkages Between Real and Financial Aspects of Economic Integration in East Asia |
Editors | Christopher Findlay, Friska Parulian and Jenny Corbett |
Place of Publication | Jakarta |
Publisher | Economic Research Institute for ASEAN and East Asia (ERIA) |
Pages | 60-93 |
Edition | 1st |
ISBN (Print) | 9786028660181 |
Publication status | Published - 2010 |