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Bhanupong Nidhiprabha

Board to stimulate the US economy lowered interest rates and pushed capital outflows to developing countries. Asset price bubbles were natural consequences of such measures. Capital inflows would lead to currency appreciation that may have an adverse impact on exchange rate movements. EXCHANGE RATE REGIMES The switch from a fixed regime to a managed float regime is illustrated in Figure 12.23. The value of the baht was allowed to move in a narrow band, providing time for the private sector to adjust to foreign exchange volatility. The Bank of Thailand did not fight

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Asia Rising

Growth and Resilience in an Uncertain Global Economy

Edited by Hal Hill and Maria Socorro Gochoco-Bautista

The centre of global economic activity is shifting rapidly towards Asia, driven by a combination of the economic dynamism of China, India and other middle-income Asian countries, and sluggish growth in the OECD economies. The rapid growth and rising global prominence has raised a range of major challenges for Asia and for the rest of the world. This comprehensive, forward-looking book examines these issues through in-depth studies of major Asian economies and an analysis of the key development policy options.
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Siow Yue Chia

, 29.5 per cent by the central government in the form of direct grants and interest rate subsidies, and 39.8 per cent by bank lending. In addition to the fiscal stimulus, the PBC adopted a highly expansionary monetary policy. In the first half of 2009, bank credit increased by RMB7.3 trillion, compared with the annual increase of RMB3.18 trillion in 2006 and RMB3.63 trillion in 2007. M2 grew at a record rate relative to GDP, so that the interbank money market M3037 - HILL 9781781007976 PRINT.indd 319 18/12/2012 14:47 320 Asia rising was flooded with liquidity

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Hal Hill and Maria Socorro Gochoco- Bautista

ASEAN neighbors, and agriculture is relatively more important. In fact, the lower-middle income developing Asian story broadly resembled that of low-income economies in general. The IMF (2010) concluded that real per capita GDP growth stayed positive in two-thirds of these countries. The main effects of the GER were transmitted not so much through movements in terms of trade and interest rates, as in previous occasions, as through a sharp contraction in export demand, FDI, and remittances. Growth was supported by countercyclical fiscal policy, an unusual outcome for

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Tham Siew Yean

in the economy (Sukhdave 2011b; Hannoun 2007). Interest rate targeting by means of the Overnight Policy Rate has been used since 1996 to achieve price stability. Figure 8.2 shows that inflation continues to be well managed after the AFC, with an average inflation rate of 2.2 per cent from 1999 to 2010. The use of monetary policy to manage price stability is also supported by the use of non-inflationary sources of financing for financing government expenditure (Thillainathan 2011). The Employee Provident Fund (EPF) is a national pension fund with mandatory

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Emmanuel S. de Dios and Geoffrey M. Ducanes

performance. Even the most basic growth theories will suggest that an economy’s level of maturity, as captured for example by per capita income, will affect its rate of investment.1 Wide differences in investment outcomes have been noted in Table 2.1. Such growth potential and trajectories also will differ depending on resource endowments, the size of internal markets, and other factors. Beyond this, however, the nature of investing actors themselves will differ across countries, as will the factors, both narrowly economic and financial as well as institutional, that

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Douglas H. Brooks and Eugenia C. Go

3. Infrastructure Douglas H. Brooks and Eugenia C. Go INTRODUCTION Asia’s high investment rates in recent decades have supported the rapid expansion of infrastructure, which in turn has supported the region’s rapid growth. The processes by which investments in physical infrastructure are planned and financed and by which they generate useful services, as well as the manner in which those services are allocated to producers and consumers, can be complex. Focusing on infrastructure assets, services, and markets – and the environment in which infrastructure makes

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Diane A. Desierto

the duty to compensate for expropriation,8 the ASEAN IGA obligated its contracting Member States to observe “fair and equitable treatment” and “full protection” of investments as defined in the ASEAN IGA.9 “Investments” were sweepingly defined in an assetbased manner, contemplating “every kind of asset,” such as movable and immovable property, shares of stock, debentures, money claims and contract claims with financial value, intellectual property rights and good will, and business concessions conferred by law or under contract, including natural resource

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Political and social foundations of economic development

Institutions, Growth and Imbalances

Lu Ming, Zhao Chen, Yongqin Wang, Yan Zhang, Yuan Zhang and Changyuan Luo

measures for a transitional transfer payment starting in 1995. As of 1996, these measures have included partial extra-budgetary funds. In 1997, governmental funds were included. The central authority gradually adjusted the rates of certain types of taxes, collected taxes on interest, cancelled the fixed asset investment control tax and carried out a series of taxation reforms. Thus, central fiscal revenues were rendered stable. The central government M3091 - LU 9780857935083 PRINT.indd 30 25/02/2013 16:03 Political and social foundations of economic development 31

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Lu Ming, Zhao Chen, Yongqin Wang, Yan Zhang, Yuan Zhang and Changyuan Luo

/4/21 1990/8/21 (%) 30 1990/4/15 China’s economic development 1989/2/1 164 Retail price index Real interest rate 20 15 10 5 0 –5 –10 Source: China Statistical Yearbook (various years) (China Statistics Press). Figure 6.4 Retail price index and real interest rate for saving in China (February 1989 to September 2007) abroad. One practical method of judging whether liquidity is excessive is to determine whether the real interest rate decreases over time, which can indicate equilibrium between the supply and demand of liquidity very precisely. From 1994 to just