Structural Changes in Asia and Growth Prospects After the Crisis
The main objective of this paper is to determine the structural factors at the root of the East Asian growth so as to assess how the crisis might alter the potential growth of the countries the most affected by the crisis. After the brilliant v-shaped recovery observed in 1999, economic activity should come back rather rapidly to its potential medium term growth path. This does not imply, by all means, that economic growth rates will stay at the historical 7-8 percent levels, both because of the mechanical slowdoctravailn which was predictable even before the crisis, based on the catch up process described in the standard neo-classical growth models, and because the crisis has threatened some of the structural changes at work in these economies. In this respect, we propose an econometric estimation based on an augmented neo-classical production function estimated from panel data for the East Asian countries for the period 1968/1996, to quantify factors that we consider have been important to the growth process of these countries. Then by referring to our econometric results we estimate growth in Asia during the proceeding years before the crisis, and the loss of potential growth that can be expected in the medium run. Finally, we construct medium term growth scenarios for 1996/2010 and try to weigh up the share of the slowdoctravailn attributed respectively to the catch up effect as well as to structural changes. While both effects are gauged, the magnitude of the slowdoctravailn due to structural changes is more pronounced.
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