Policy Responses from Four Economies
Edited by Daigee Shaw and Bih Jane Liu
Chapter 4: Why World Exports are so Susceptible to the Economic Crisis: The Prevailing ‘Export Overshooting’ Phenomenon, with Particular Reference to Taiwan
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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