Publication: Managing East Asia's Macroeconomic Volatility
Date
2009-07-01
ISSN
Published
2009-07-01
Author(s)
Abstract
East Asia has experienced a dramatic
decrease in output growth volatility over the past 20 years.
This is good news, as output growth volatility affects poor
households because of coping strategies that have long-term,
harmful consequences, and the overall economy through its
negative impact on economic growth. This paper investigates
the factors behind this long decline in volatility, and
derives lessons about ways to mitigate renewed upward
pressure in face of the financial crisis. The authors show
that if, on the one hand, high trade openness has sustained
economic growth in the past several decades, on the other
hand, it has made countries more vulnerable to external
fluctuations. Although less frequent terms of trade shocks
and more stable growth rates of trading partners have helped
to reduce volatility in the past, the same external factors
are now putting renewed pressure on volatility. The way
forward seems therefore to be to counterbalance the external
upward pressure on volatility by improving domestic factors.
Elements under domestic control that can help countries deal
with high volatility include more accountable institutions,
better regulated financial markets, and more stable fiscal
and monetary policies.
Link to Data Set
Citation
“Olaberria, Eduardo; Rigolini, Jamele. 2009. Managing East Asia's Macroeconomic Volatility. Policy Research working paper ; no. WPS 4989. © http://hdl.handle.net/10986/4180 License: CC BY 3.0 IGO.”
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