Suchergebnisse

Developing Asian countries have accumulated foreign exchange reserves on an unprecedented scale in recent years. There is a growing consensus that Asia's reserves now substantially exceed the levels required for precautionary purposes or for self-protection against currency crisis. The central objective of our paper is to informally and formally test whether reserves in developing Asia have in fact reached excessive levels. Informal tests of reserve adequacy based on widely used rules of thumb such as the Greenspan-Guidotti rule unambiguously indicate the presence of sizable excess reserves. To test for excess reserves more formally, we use panel-data econometric analysis based on Edison (2003). Our estimation results indicate the presence of large and growing excess reserves since 2002. The results of both informal and formal tests thus confirm the popular belief that developing Asia now has excessive foreign exchange reserves. Therefore, the short-run policy challenge for Asian governments is to manage the region's burgeoning excess reserves more actively and use them more productively. One promising area of future research, brought to the fore by the global financial crisis, is to develop more nuanced measures of reserve adequacy that take into account the possibility of severe negative shocks.

Sovereign wealth funds (SWFs) have emerged in developing Asia as a policy response to an unprecedented accumulation of foreign exchange (FX) reserves since 2000. At the same time, developing countries have become an increasingly important source of outward foreign direct investment (FDI). The central objective of this paper is to evaluate the prospects for SWFs to serve as a major conduit for the region's outward FDI. In principle, FDI represents an attractive means of earning higher returns on FX reserves than traditional reserve assets. In practice, the limited institutional capacity and the political sensitivity of state-led FDI severely constrains the ability of developing Asia's SWFs to undertake FDI on a significant scale. Therefore, the potential for developing Asia's SWFs to become major sources of outward FDI is more apparent than real. This paper also explores the implications of the Santiago Principles and the global financial crisis on outward FDI by SWFs.

This paper empirically examines the relative importance of different sources of inflation in developing Asia. In particular, it tests the widely held view that the region's current inflation surge is primarily the result of external price shocks such as oil and food shocks. In addition, this paper also estimates the degree of pass-through of external price shocks to domestic prices. Our central empirical result is that contrary to popular misconception, Asia's inflation is largely due to excess aggregate demand and inflation expectations rather than external price shocks. This suggests monetary policy will remain a powerful tool in the fight against inflation in Asia. Another significant finding is that the pass-through of the external price shocks to domestic prices has been limited so far. However, the removal of government subsidies is likely to lead to greater pass-through in the future. The resulting inflationary pressures provide a further rationale for tightening monetary policy.

Korea's financial crisis of 1997–1998 was brought about by the unsustainable combination of large capital inflows and an inefficient financial system. The Bank of Korea contributed to the crisis primarily through its failures as the regulator of the financial system rather than as the conductor of monetary policy. Our paper explores the role of the two major monetary policy reforms Korea has implemented in response to the crisis — the establishment of a new financial regulator and the adoption of inflation targeting — in Korea's efforts to build a stronger and more efficient financial system, thereby preventing crises in the future.

We assess the role of financial reforms and liberalization in Korea's financial crisis, which erupted in late 1997. We first examine financial reforms carried out since the early 1980s and their effects on corporate financing as well as on the current account. We then analyze policy issues associated with the current financial crisis. Our main conclusion is that the crisis is due in no small measure to the unbalanced nature of Korea's financial reforms — extensive external liberalization combined with inadequate internal liberalization. The massive inflow of foreign capital associated with external liberalization exacerbated the over-investment problem that already existed in the 1970s. The inefficiencies of Korea's manufacturing corporations and financial institutions mutually reinforced each other, producing a vicious cycle of ever lower productivity of capital. The key to Korea's recovery thus lies in successful restructuring of both its financial and corporate sectors.