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on South East Asia |
| By: | Felipe Meza; Erwan Quintin |
| Abstract: | Total factor productivity (TFP) falls markedly during financial crises, as we document with recent evidence from Mexico and Asia. These falls are unusual in magnitude and present a difficult challenge for the standard small open economy neoclassical model. We show in the case of Mexico’s 1994-95 crisis that the model predicts that inputs and output should have fallen much more than they did. Using models with endogenous factor utilization, we find that capital utilization and labor hoarding can account for a large fraction of the TFP fall during the crisis. However, these models also predict that output should fall significantly more than in the data. Given the behavior of TFP, the biggest challenge may not be explaining why output falls so much following financial crises, but rather why it falls so little. |
| Keywords: | Financial crises - Mexico |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:feddcl:0105&r=sea |
| By: | Takatoshi Ito; Kiyotaka Sato |
| Abstract: | Macroeconomic consequences of a large currency depreciation among the crisis-hit Asian economies had varied from one country to another. Inflation did not soar in most Asian countries, including Thailand and Korea, after the exchange rate depreciated during the crisis. Indonesia, however, suffered very high inflation following a very large nominal depreciation of the rupiah. As a result, price competitive advantage by the rupiah depreciation was lost in the real exchange rate terms. The objective of this paper is to examine the pass-through effects of exchange rate changes on the domestic prices in the East Asian economies using a VAR analysis. Main results are as follows: (1) the degree of exchange rate pass-through to import prices was quite high in the crisis-hit economies; (2) the pass-through to CPI was generally low, with a notable exception of Indonesia: and (3) in Indonesia, both the impulse response of monetary policy variables to exchange rate shocks and that of CPI to monetary policy shocks are positive, large, and statistically significant. Thus, Indonesia’s accommodative monetary policy, coupled with the high degree of the CPI responsiveness to exchange rate changes was an important factor in the spiraling effects of domestic price inflation and sharp nominal exchange rate depreciation in the post-crisis period. |
| JEL: | F12 F31 F41 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12395&r=sea |
| By: | Dean Yang |
| Abstract: | This paper distinguishes between target-earnings and life-cycle motivations for return migration by examining how Philippine migrants’ return decisions respond to major, unexpected exchange rate changes in their overseas locations (due to the Asian financial crisis). Overall, the evidence favors the life-cycle explanation: more favorable exchange rate shocks lead to fewer migrant returns. A 10% improvement in the exchange rate reduces the 12-month return rate by 1.4 percentage points. However, some migrants appear motivated by target-earnings considerations: in households with intermediate foreign earnings, favorable exchange rate shocks have the least effect on return migration, but lead to increases in household investment. |
| JEL: | D13 F22 J22 O12 O15 |
| Date: | 2006–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:12396&r=sea |