The Transmission Mechanism of Financial Shocks
Edited by Satoshi Inomata
Chapter 2: Impact of the Global Economic Crisis on Employment in the Asia-Pacific Region
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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