The US Financial Crisis, Global Financial Turmoil, and Developing Asia: Is the Era of High Growth at an End?
James, William E.; Park, Donghyun; Jha, Shikha; Jongwanich, Juthathip; Terada-Hagiwara, Akiko; Sumulong, Lea | December 2008
Abstract
The global economy is threatened with a deep and prolonged recession as a
consequence of the financial meltdown that began with the housing price crisis
in the United States. The financial implications of the global macroeconomic
imbalances that have persisted and enabled the housing bubble to develop
with the spread of toxic mortgage-backed securities first became apparent in
September and October 2008 with the collapse of major investment banks and
mortgage loan institutions, and the credit freeze and the panic that ensued in
global equity markets. This paper provides a summary of these events and
the transmission of the crisis from the United States to United Kingdom, the
eurozone, other industrial economies, emerging markets, and developing Asia.
Financial and real economy effects of the crisis on Asia and various channels
of transmission of the crisis are evaluated in some detail. In general, financial
institutions, particularly commercial banks in developing Asia are well prepared
to cope with this crisis as a result of reforms undertaken in response to the
Asian crisis of a decade ago, and the fact that Asia has accumulated vast
foreign exchange reserves through persistent current account surpluses. Still
the real economy effects of the global downturn are likely to be severe. A major
deterioration in economic growth in developing Asia in both the current and
the coming year is in the cards. Growth in world trade is likely to stall making
it difficult for export-oriented economies in the region to continue rapid growth
fueled by external demand. Rebalancing Asia’s growth toward domestic demand
led by consumption, infrastructure investment, and improved health and social
security programs will be important in cushioning the impact of the recession
taking place in the industrial economies. This paper sets the context for the
Asian Development Outlook 2009 with an emphasis on rebalancing growth in
developing Asia and, by implication, the world economy.
Citation
James, William E.; Park, Donghyun; Jha, Shikha; Jongwanich, Juthathip; Terada-Hagiwara, Akiko; Sumulong, Lea. 2008. The US Financial Crisis, Global Financial Turmoil, and Developing Asia: Is the Era of High Growth at an End?. © Asian Development Bank. http://hdl.handle.net/11540/1518.ISSN
1655-5252
Keywords
Macroeconomic
Macroeconomic Analysis
Performance Evaluation
Impact Evaluation
Economic indicators
Growth models
Gross domestic product
Macroeconomics
Economic forecast
Exports
Economic development projects
Economic policy
Economic forecasting
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Citable URI
http://hdl.handle.net/11540/1518Metadata
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