The Impact of the Economic Crisis on East Asia
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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.
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Chapter 9: Fiscal Discipline in the Recovery from a Global Financial Crisis

Chih-Chin Ho, Yu-Shan Hsu and Ching-Shin Mao


Chih-Chin Ho,1 Yu-Shan Hsu and Ching-Shin Mao 9.1 INTRODUCTION How much debt can a country sustain? Government debt is growing faster than GDP in most countries. Figure 9.1 shows the government debt of the United Kingdom and the United States as a percentage of GDP. The Congressional Budget Office of the United States estimate that the debtto-output ratio will reach 113 per cent by 2026 and 200 per cent in 2038 under their most realistic scenario. The editorial of the Washington Post on 29 June 2009 even coined the term ‘debt tsunami’. In this chapter, we % 70 United States United Kingdom 60 Share of GDP 50 40 30 1980 1985 1990 1995 2000 2005 2010 Figure 9.1 Debt as percentage of GDP. 165 M2627 - SHAW TEXT.indd 165 25/05/2011 13:06 166 % 7.00 6.00 5.00 4.00 3.00 2.00 1.00 0.00 The impact of the economic crisis on East Asia 01 01 01 01 01 01 01 01 1-0 07 20 08 -0 1- 1- 1- 1- 1- 1- 1- -0 -0 -0 -0 -0 -0 00 01 02 03 04 05 20 20 20 20 20 20 20 06 -0 Figure 9.2 United States federal funds rates. want to discuss fiscal discipline in the recovery from crises. It is not that we have to disagree with expansionary fiscal policy to rescue the economy; it just seems that the government never thinks of the exit strategy. (The government always talks about more spending and less taxes. Few heads...

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