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High Growth and Low Consumption in East Asia :, How to Improve Welfare While Avoiding Financial Failures, Celine Rochon, Andrew Feltenstein, Maral Shamloo

This paper analyzes certain policies that are typical of a number of rapidly growing East Asian countries in which a fixed exchange rate, combined with a surplus labor market, has made domestic assets relatively inexpensive, generating high rates of FDI as well as domestic capital formation. This "investment hunger" can lead to unanticipated declines in the returns to investment, and resulting financial insolvencies. Private consumption remains low and there are concerns that high savings rates cannot be sustained. We construct a dynamic general equilibrium model and apply it to a stylized Asian economy, loosely based upon China. We calibrate a benchmark equilibrium, and carry out various counterfactual simulations to analyze alternative policies, in particular tax cuts and exchange rate revaluations, as instruments in increasing private consumption while avoiding bank failures
Table Of Contents
Contents; I. Introduction; II. FDI Issues and Intuition; A. FDI and Exchange Rates: A Review of the Literature; B. Evidence in Favor of Export-Platform FDI; C. Consumption; III. Model Structure; A. Production; B. Current Production; C. Domestic Investment; D. Bankruptcy; E. Foreign Direct Investment; F. Banking; G. Consumption; H. The Government; I. The Foreign Sector; IV. Estimating FDI Elasticities; A. Methodology; B. Data and Samples; C. Results; Tables; 1. Elasticities of Changes in FDI Inflows with Respect to Real Interest Rates, Growth and Changes in Exchange Rate; V. An Application
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (35 p.)
Specific Material Designation
Form Of Item

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