The Developing Economies

Volume 37, Number 1 (March 1999)

■ The Developing Economies Volume 37, Number 1 (March 1999)
■ B5
■ 105pp
■ March 1999

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Asian Currency Crisis and the Role of Japan (1.27MB) / Shuntaro Shishido and Tomoyoshi Nakajima

Simulation Analysis of Exchange Rate Dynamics: The Case of Indonesia (1.18MB) / Takao Fukuchi and Suminori Tokunaga


Shuntaro Shishido and Tomoyoshi Nakajima, "Asian Currency Crisis and the Role of Japan," pp. 3-34.

The Asian currency crisis which began in 1997 is analyzed in this paper within a multi-sectoral world econometric model. Three Asian economies (the Republic of Korea, Indonesia, and Thailand) which accepted the IMF emergency aid program are examined in the context of the East Asia and the world economy. After reviewing the various impacts of the currency crisis on output, trade, and the balance of payments in the Asian and world economies, three Japanese policy packages for recovering from the crisis are proposed and evaluated. These are (a) the promotion of Japan's domestic demand and imports, (b) the yen's appreciation to stimulate Asian exports, and (c) a dramatic increase in Japan's ODA to the said three Asian countries. The third package is concluded to be the most effective as it directly stimulates not only their exports but also domestic demand.

Takao Fukuchi and Suminori Tokunaga, "Simulation Analysis of Exchange Rate Dynamics: The Case of Indonesia," pp. 35-58

To analyze the current Indonesian economic crisis and clarify the exchange rate dynamics, we constructed a monthly econometric model for the Indonesian economy for February 1996 to December 1997 with eleven endogenous variables including exchange rate, capital inflow and outflow, imports/exports and GDP. By the final test, the changes in exchange rate have been decomposed into bandwagon effect (66.0%), net capital inflow (15.6%), and PPP variable (18.4%). An in-sample simulation clarified the devaluation effect on the capital market and trade balance. By comparing the simple projection and actual figures, we estimated the influences of noneconomic factors (Rp4,640 in March 1998). Assuming persistence of these disturbances, we made conditional forecasts up to December 1998. In the intermediate case, the exchange rate is 10,210 Rp/$ in December 1998, the annual GDP growth rate is -14%, the trade balance is around U.S.$42 billion as exports growth is stagnant while imports decrease by 75%.

Xinshen Diao, Terry L. Roe, and A. Erinc Yeldan, "How Fiscal Mismanagement May Impede Trade Reform: Lessons from an Intertemporal, Multi-sector General Equilibrium Model for Turkey," pp. 59-88.

We utilize a multi-sector general equilibrium model based on intertemporally optimizing agents to study issues of trade liberalization and fiscal adjustments in the context of the Turkish economy. The model is based on the neoclassical growth theory in its adjustment to steady state dynamics, and on the Walrasian general equilibrium theory of a small open economy in attaining equilibrium in its commodity and factor markets. A key feature of the model is its explicit recognition of the distortionary consequences of excessive borrowing requirements of the public sector through increased domestic interest costs. The model results suggest that the postponement of adjustment to growing public debt and fiscal imbalances could be detrimental; and that in the absence of coordinated fiscal reforms, the welfare gains expected from pure trade liberalization may significantly be negated.

Nurhan Yenturk, "Short-Term Capital Inflows and Their Impact on Macroeconomic Structure: Turkey in the 1990s," pp. 89-113.

This paper concentrates on the role of speculative capital inflows in aggravating both the external and public deficit in Turkey, as well as the role of government mismanagement in increasing the instability and in bringing about the financial crisis of 1994. The paper also examines the post-crisis period (1995-96) in order to answer the question of whether a new financial crisis will occur.

Toshiyuki Mizoguchi, "Estimates of Long-Term National Accounts Statistics of Taiwan, 1912-90," pp. 114-30.

The Taiwanese economy has had an excellent record of economic development during the century since its separation from mainland China in 1895. The average growth rate of real GDP is high by international standards according to long-term estimates of national accounts published by the Directorate-General of Budgets, Accounting and Statistics for the period 1951-90. Previous research has also shown steady growth of the Taiwanese economy under the Japanese occupation from 1895 to 1940, although real GDP declined in the 1940s due to the Second World War and civil strife in China. The aim of this paper is to link together various sources for the purpose of depicting Taiwan's development in the framework of 1968 System of National Accounts (SNA) and presenting the basic data for its historical study, which will hopefully be of use to development economists