The Impact of the Economic Crisis on East Asia

The Impact of the Economic Crisis on East Asia

Policy Responses from Four Economies

Edited by Daigee Shaw and Bih Jane Liu

Written by a distinguished group of Asian social scientists, this study summarizes and synthesizes the economic impacts of the crisis on individual countries and their policy response since 2008, and in particular carefully scrutinizes the immediate and remote causes of the crisis. It not only offers an assessment of its impacts, and identifies specific country measures that can be undertaken to stabilize the situation, but also looks at the crisis from three important economic perspectives: that of a healthy fiscal system, international trade, and the energy market.

Chapter 4: Why World Exports are so Susceptible to the Economic Crisis: The Prevailing ‘Export Overshooting’ Phenomenon, with Particular Reference to Taiwan

Bih Jane Liu

Subjects: asian studies, asian economics, economics and finance, asian economics

Extract

Bih Jane Liu1 4.1 INTRODUCTION In the years leading up to the summer of 2007 when the US subprime crisis began to unfold, the world saw a period of relative calm and prosperity after the recovery from the dot-com bubble-burst in the early 2000s. While the major industrialized nations grew at a modest pace of 1 to 3 per cent per annum, the rise of the BRIC and other emerging markets gave great impetus to the world’s economic progress and spurred high growth in world trade. But the subprime loan problem gave way quickly to a broad global crisis marked by slowing economies and dried-up liquidity with unprecedented reach. The scope and devastating impacts of the global financial crisis were greater than anyone had anticipated. Like a game of dominos, the financial crisis started in the United States and spread to the rest of the world. It first lacerated the world’s financial systems, then jolted and knocked out the real economy. No country was immune to it. Not the ‘Wealthy Country Club’ with member countries such as the United States, Germany and Japan. Not the usually resilient East Asian NICs. Not even the up-and-coming powerful BRIC group. Among all these, countries with a strong export orientation and opened up most to the world, especially Japan and the East Asian NICs, were hit the hardest. Figure 4.1 and 4.2 show clearly the impacts of the financial crisis of 2008 on the volume of world exports for a sample of eleven countries...

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