Asia Beyond the Global Economic Crisis

Asia Beyond the Global Economic Crisis

The Transmission Mechanism of Financial Shocks

Edited by Satoshi Inomata

The characteristic feature of the recent global economic crisis is the speed and extent of the shock transmission. The development of cross-national production networks in recent years has significantly deepened the economic interdependency between countries, and a shock that occurs in one region can be swiftly and extensively transmitted to the rest of the globe. The sudden contraction of world trade and output was a negative outcome of this intertwined global economic system. Based on the method known as international input–output analyses, this book provides a detailed examination of the mechanics of shock transmission by probing the labyrinth of complex supply networks among nations.

Chapter 2: Impact of the Global Economic Crisis on Employment in the Asia-Pacific Region

Bo Meng and Satoshi Inomata

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


Bo Meng and Satoshi Inomata1 INTRODUCTION 1. The recent economic crisis is considered ‘the most serious financial crisis’ since the Great Depression, as seen in the significant decline in many economic indicators, especially those that are employment-related. According to a recent report2 by the International Labour Office (ILO), the crisis could cause the loss of an estimated 18–30 million job opportunities. Juan Somavia, the ILO Director-General, stated ‘this is not simply a crisis on Wall Street, this is a crisis on all streets’. A more pressing concern is that without prompt government action to contain rising unemployment, it may lead to social or political upheaval in the worst hit countries. To take appropriate employment measures, policy makers should have a clear understanding of the depth and extent of the crisis from a global perspective. In this field of research, the following three economic models are probably most frequently used: macro-econometric models, Computable General Equilibrium (CGE) models, and input–output (I–O) models. For the impact analysis of the crisis on employment, which is most suitable? Considering the analytical purpose of the chapter and data availability, the I–O model is adopted here for the following reasons. On the one hand, compared to macro-econometric models, the I–O models are considered preferable for analysing structural change, especially when such change is caused by external economic shocks. On the other hand, compared to CGE models, I–O models guarantee high cost–performance since there is no need to calibrate many unknown...

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