Causes and Consequences of Global Imbalances: Perspective from Developing Asia

Adams, Cha les; Pa k, Donghyun Wo king Pape Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia ADB Economics Wo king Pape Se ies, No. 157 P o ided in Coope a ion wi h: Asian De elopmen Bank (ADB), Manila Sugges ed Ci a ion: Adams, Cha les; Pa k, Donghyun (2009) : Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia, ADB Economics Wo king Pape Se ies, No. 157, Asian De elopmen Bank (ADB), Manila, h ps://hdl.handle.ne /11540/1804 This Ve sion is a ailable a : h ps://hdl.handle.ne /10419/109341 S anda d-Nu zungsbedingungen: Die Dokumen e au EconS o dü en zu eigenen wissenscha lichen Zwecken und zum P i a geb auch gespeiche und kopie we den. Sie dü en die Dokumen e nich ü ö en liche ode komme zielle Zwecke e iel äl igen, ö en lich auss ellen, ö en lich zugänglich machen, e eiben ode ande wei ig nu zen. 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Asian De elopmen Bank 6 ADB A enue, Mandaluyong Ci y 1550 Me o Manila, Philippines www.adb.o g/economics ©2008 by Asian De elopmen Bank Ap il 2009 ISSN 1655-5252 Publica ion S ock No.: The iews exp essed in his pape a e hose o he au ho (s) and do no necessa ily e lec he iews o policies o he Asian De elopmen Bank. The ADB Economics Wo king Pape Se ies is a o um o s imula ing discussion and elici ing eedback on ongoing and ecen ly comple ed esea ch and policy s udies unde aken by he Asian De elopmen Bank (ADB) s a , consul an s, o esou ce pe sons. The se ies deals wi h key economic and de elopmen p oblems, pa icula ly hose acing he Asia and Paci ic egion; as well as concep ual, analy ical, o me hodological issues ela ing o p ojec /p og am economic analysis, and s a is ical da a and measu emen . The se ies aims o enhance he knowledge on Asia’s de elopmen and policy challenges; s eng hen analy ical igo and quali y o ADB’s coun y pa ne ship s a egies, and i s sub egional and coun y ope a ions; and imp o e he quali y and a ailabili y o s a is ical da a and de elopmen indica o s o moni o ing de elopmen e ec i eness. The ADB Economics Wo king Pape Se ies is a quick-dissemina ing, in o mal publica ion whose i les could subsequen ly be e ised o publica ion as a icles in p o essional jou nals o chap e s in books. The se ies is main ained by he Economics and Resea ch Depa men . Con en s Abs ac I. In oduc ion 1 II. P o ile o Global Imbalances and Cu en Accoun Posi ions o Asian Coun ies 4 A. P o ile o Global Imbalances 4 B. Cu en Accoun Posi ion o Ele en Economies in De eloping Asia 8 III. Causes o De eloping Asia’s Pos c isis Cu en Accoun Su pluses 13 A. Too Much Sa ings? 13 B. Too Li le In es men ? 14 C. B e on Woods II View: Role o Highly Compe i i e Exchange Ra es 15 D. Summa y 16 IV. Consequences o Global Imbalances o De eloping Asia 16 A. Bene i and Limi s o De eloping Asia’s Expo -Led G ow h 17 B. Cos s o O e sa ing and Unde in es men 17 C. Cos s o Excessi e Fo eign Exchange Rese es 18 D. Cos s o he Global Financial C isis o De eloping Asia 18 E. Cos s o Global Imbalances on De eloping Asia’s Economic G ow h 18 F. Summa y 19 V. Concluding Obse a ions 19 Re e ences 24 Abs ac Global cu en accoun imbalances a e one o he key mac oeconomic imbalances ha unde lie he global inancial c isis. The cen al objec i e o his pape is o analyze he causes and consequences o global imbalances om he pe spec i e o de eloping Asia. Mo e speci ically, we examine he oo causes o he la ge and pe sis en cu en accoun su pluses ha ha e eme ged in he egion since he Asian c isis. We also explo e he consequences o global imbalances o he egion, in e ms o wel a e and economic g ow h. Based on ou analysis, we ecommend a numbe o conc e e policy di ec ions o help Asia ebalance i s demand and g ow h owa d domes ic sou ces. Uni ed S a es Uni ed S a es Uni ed S a es Middle Eas and Russia Middle Eas and Russia Middle Eas and Russia Japan Japan Japan De eloping Asia De eloping Asia 2000 2005 2007 De eloping Asia Figu e 3: Dis ibu ion o Cu en Accoun Imbalances (US dolla s) No e: Cu en accoun igu es a e in absolu e alues. Sou ce: In e na ional Mone a y Fund, Wo ld Economic Ou look Da abase, downloaded 10 Janua y 2009. De eloping Asia Middle Eas and Russia 1,200 900 600 300 0 −300 $ billion 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 es ima e 1,200 900 600 300 0 −300 $ billion 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 es ima e Figu e 4: Cu en Accoun Financing Pa e ns (US dolla s) con inued. Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 7 Figu e 4: con inued. Wes e n Hemisphe e A ica Eme ging Eu ope 300 200 100 0 −100 $ billion 300 200 100 0 −100 $ billion 300 200 100 0 −100 $ billion 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 es ima e 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 es ima e 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 es ima e Ne p i a e capi al lows Rese e accumula ion Ne o icial capi al lows No e: Eme ging Eu ope comp ises Eu ope excluding he Eu o a ea and Uni ed Kingdom. B. Cu en Accoun Posi ion o Ele en Economies in De eloping Asia Looking a he cu en accoun posi ion o de eloping Asia as a whole p o ides a pe spec i e on he egion’s con ibu ion o he global cu en accoun imbalances. I also makes i abundan ly clea ha de eloping Asia has been an impo an and g owing con ibu o o he ecen global imbalances. Howe e , a egionwide ocus obscu es impo an di e ences in he beha io o cu en accoun balances wi hin he egion. Figu e 5 shows he a io o cu en accoun balances o own GDP o he 11 la ges economies in he egion o which da a a e a ailable. The da a ein o ce he ea lie obse a ion ha cu en accoun su pluses a e no an in insic s uc u al cha ac e is ic o de eloping Asian economies bu a ecen de elopmen ha has become clea ly isible only since he Asian c isis. The only g oup o coun ies ha seems o ha e a s uc u al cu en accoun su plus is Hong Kong, China; Singapo e; and Taipei,China. The 11 sample coun ies join ly accoun o o e 95% o he egion’s GDP. The igu e makes i clea ha he e is no single pa e n o cu en accoun beha io ha is common h oughou he egion. Ins ead ou b oad ypes o beha io can be iden i ied. 8 | ADB Economics Wo king Pape Se ies No. 157 (i) Asian C isis A ec ed Middle-Income Economies (Indonesia, Ko ea, Malaysia, Philippines, Thailand) In hese coun ies, he cu en accoun shi ed om de ici o la ge su plus a ound he ime o he Asian inancial c isis and ha e subsequen ly na owed in he las ew yea s, excep in he case o Malaysia.5 (ii) Pe sis en High-Income Su plus Economies (Hong Kong, China; Singapo e; Taipei,China) In hese cases, cu en accoun s ha e been in su plus o ex ended pe iods wi h he su pluses inc easing in ecen yea s. (iii) Pe sis en Low-Income Cu en Accoun De ici Economies (India, Vie Nam). In hese cases, cu en accoun s ha e been in de ici on a e age. (i ) Low-Income Cu en Accoun Su plus Economies (PRC). In his case, he cu en accoun ended o be in small su plus bu he su plus has inc eased d ama ically in ecen yea s. The la ge inc ease in he cu en accoun su plus o de eloping Asia as whole since he la e 1990s occu ed in wo dis inc phases, and di e en g oups o coun ies in he egion d o e he cu en accoun imbalance du ing he wo phases. In he immedia e a e ma h o he 1997 inancial c isis, he inc ease in he egion’s su plus la gely e lec ed swings in he cu en accoun balances o he c isis economies om posi ions o la ge de ici in o la ge su plus.6 Subsequen ly, howe e , and especially a e 2003, he inc ease in he egion’s o e all su plus has la gely been he esul o a su ge in he PRC’s su plus since he su pluses in mos o he c isis economies ha e na owed, while India and Vie Nam ha e mo ed in o la ge cu en accoun de ici . To a signi ican deg ee, de eloping Asia’s cu en accoun su plus in ecen yea s has been linked e y closely linked o he PRC’s la ge cu en accoun su plus. Finally, he da a in Figu e 6 o e a b oade pe spec i e on he egion’s cu en accoun imbalances. The da a display he ela ionship be ween he changes in cu en accoun balances and he changes in sha es o expo s in ela ion o GDP be ween he p ec isis pe iod and he pos c isis pe iod. The da a clea ly poin o a s ong posi i e ela ionship be ween he inc eases in cu en accoun su pluses and he deg ee o expo openness, and hence, implici ly, he sha e o adables in GDP. As cu en accoun su pluses ha e isen in ecen yea s, he a io o expo s o GDP has also isen. The ela ionship, howe e , is no one- o-one and expo openness ac oss he egion has inc eased e en in he ace o di e ences in he beha io o cu en accoun posi ions ac oss economies. Ne e heless, he da a in Figu e 6 seem o suppo he no ion ha de eloping Asia’s cu en accoun su pluses ha e been d i en by he egion’s high and g owing dependence on expo s as he main engine o g ow h. 5 The ecen widening o Malaysia’s cu en accoun su plus has e lec ed mainly he e ec s o highly ele a ed commodi y p ices. 6 These swings we e he esul o he la ge p i a e capi al low e e sals a he ime o he c isis. Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 9 30 20 10 0 −10 −20 30 20 10 0 −10 −20 30 20 10 0 −10 −20 30 20 10 0 −10 −20 Figu e 5: Cu en Accoun Balances o Indi idual Asian Economies (pe cen o GDP) 1980 080420009692 China, People’s Rep. o 8884 1980 0804200096928884 1980 0804200096928884 1980 0804200096928884 Hong Kong, China Singapo e Taipei,China Vie Nam India Indonesia Malaysia Thailand Ko ea, Rep. o Philippines Sou ce: In e na ional Mone a y Fund, Wo ld Economic Ou look Da abase, downloaded 10 Janua y 2009. 10 | ADB Economics Wo king Pape Se ies No. 157 36 32 28 24 20 16 Expo s (pe cen o GDP)Expo s (pe cen o GDP) Expo s (pe cen o GDP) Figu e 6: Sha es o Expo s in GDP and Cu en Accoun Balances o Indi idual Asian Economies A A B 0 2 4 6 8 People’s Republic o China Hongkong, China Singapo e Cu en Accoun (pe cen o GDP) -5 0 5 10 15 12 14 16 18 20 22 Cu en Accoun (pe cen o GDP) Cu en Accoun (pe cen o GDP) B A B A B 200 180 160 140 120 250 230 210 190 170 Newly Indus ializing Economies Expo s (pe cen o GDP) Taipei,China 2 3 4 5 6 87 Cu en Accoun (pe cen o GDP) 65 60 55 50 45 40 con inued. Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 11 Figu e 6: Con inued. A Indonesia Republic o Ko ea Malaysia Thailand Philippines −3 −2 −1 0 1 2 B 1997/1998 C isis Coun ies −2 −1 0 21 3 −10 −5 0 5 10 15 −3 −2 −1 0 1 2 −6 −4 −2 20 4 34 31 28 26 45 41 37 32 29 25 120 110 100 90 80 75 65 55 45 35 50 45 40 35 30 A B A B A B A B Expo s (pe cen o GDP) Cu en Accoun (pe cen o GDP) Expo s (pe cen o GDP) Expo s (pe cen o GDP)Expo s (pe cen o GDP) Expo s (pe cen o GDP) Cu en Accoun (pe cen o GDP) Cu en Accoun (pe cen o GDP) Cu en Accoun (pe cen o GDP) Cu en Accoun (pe cen o GDP) con inued. 12 | ADB Economics Wo king Pape Se ies No. 157 Figu e 6: Con inued. A India Vie Nam −12 −1.0 −0.8 −0.6 −0.4 −0.2 0.0 −0.8 −0.6 −0.4 −0.2 0.0 B 20 18 16 14 12 10 70 60 50 40 30 A B Cu en Accoun (pe cen o GDP) Cu en Accoun (pe cen o GDP) Expo s (pe cen o GDP) Expo s (pe cen o GDP) III. Causes o De eloping Asia’s Pos c isis Cu en Accoun Su pluses Ha ing e iewed he beha io o he cu en accoun in he egion, we a e now eady o explo e he possible explana ions o he eme gence o su pluses in he egion since he Asian c isis. By de ini ion, he cu en accoun balance is equal o he di e ence be ween sa ing and in es men . As such, i is possible o iew a la ge and pe sis en cu en accoun su plus as a ising om sa ing being “ oo high” o in es men being “ oo low”. The e o e, one se o explana ions o he egion’s ans o ma ion in o a ch onic su plus egion e ol es a ound he causes o high sa ings a es, and he o he on he causes o he decline in in es men a es, especially in he c isis-hi coun ies. A hi d se o explana ions, known as B e on Woods II, akes in o accoun he possibili y ha highly compe i i e exchange a es a e he unde lying d i e o bo h cu en accoun su plus and economic g ow h. A. Too Much Sa ings? One b oad se o explana ions o de eloping Asia’s cu en accoun su pluses ocuses on he egion’s high sa ing a es. Why has sa ing su ged in ecen yea s in pa s o he egion, especially since 2003? Va ious explana ions ha e been ad anced o he high and ising na ional sa ings a es ha he egion has wi nessed. Since he inc ease in sa ings a es has been la ges in he PRC, much o he empi ical wo k has ocused on he PRC expe ience (Weime 2008, Kujis 2005), and has cen e ed on seeking o model he p oxima e ac o s unde lying he ecen su ge in he PRC’s sa ing. A he same ime, howe e , he e has also been some empi ical analysis o sa ings in de eloping Asia mo e b oadly in he con ex o seeking o unde s and he ac o s unde lying he global cu en accoun imbalances (IMF 2006b). Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 13 Se e al ac o s ha e been p oposed as possible con ibu o s o he ecen su ge in egional p i a e sa ings. These include: he egion’s ecen apid GDP g ow h, wi h a key inding om nume ous sa ing s udies being ha apid g ow h lead o su ges in sa ing;7 inc eased unce ain y in he wake o he Asian c isis expe ience, wi h a po en ially posi i e e ec on p ecau iona y sa ing; demog aphic ac o s, in pa icula he e ec o a egionwide demog aphic ansi ion owa d olde popula ions; and inancial de elopmen , which may in p inciple ha e ei he posi i e o nega i e e ec on sa ing. As ypi ied by IMF (2005) and Pa k and Shin (2009), one cen al inding ac oss much o he empi ical wo k is he key ole played by he egion’s apid GDP g ow h in explaining i s high p i a e sa ing a e, and he impo an ole played by demog aphic ac o s in a numbe o coun ies. Empi ical s udies indica e ha sa ings a es in he egion we e somewha highe han implied by s anda d ela ionships in he pe iod immedia ely a e he Asian c isis, pe haps as a esul o a sha p ise in unce ain y, bu his e ec appea s o ha e waned in ecen yea s (IMF 2006b, Be nanke 2005). Based on he analysis abo e, a key obus inding is ha much, bu no all, o he ecen su ge in he egion’s sa ing has been he esul o apid a es o economic g ow h, especially in he PRC. To he ex en ha his is he case, a key de e minan o he egion’s cu en accoun su pluses, especially in ecen yea s, could be seen as i s apid a es o economic g ow h. In he case o he PRC, such an e ec p obably explains a la ge pa o he ecen inc ease in he sa ing a e on accoun o he ac ha ecen g ow h a es in he PRC ha e been excep ionally high. Elsewhe e in he egion, howe e , as e GDP g ow h is a bes a pa ial explana ion o any inc ease in sa ings a es inso a as a e age GDP g ow h in he las se e al yea s has ended o be below i s p ec isis a es in much o he egion (ADB 2008). B. Too Li le In es men ? Ano he se o explana ions o he egion’s cu en accoun su pluses ocuses on he weakening o in es men in pa s o he egion since he Asian c isis. Why has in es men weakened since he c isis? Ac oss he egion, wi h he no able excep ions o PRC, India, and Vie Nam, in es men as a sha e o GDP has been unusually low since he Asian inancial c isis, wi h his weakness accoun ing o he bulk he egion’s shi owa d cu en accoun su pluses in he pe iod immedia ely a e he c isis. To some deg ee, he in es men weakness has been in he eal es a e sec o , whe e he e had been massi e o e in es men in se e al coun ies in he un-up o he Asian c isis, and some e u n o lowe and mo e sus ainable in es men a es was o be expec ed.8 Fo he mos pa , howe e , he weakness has been ac oss all he componen s o in es men and has occu ed bo h in coun ies ha we e a he cen e o he c isis and hose ha we e no . 7 The s ong posi i e ela ionship be ween sa ings a es and GDP g ow h a es is ound in bo h ime se ies and c oss sec ional eg essions. In p inciple, he ela ionship can be de i ed om ei he li e cycle o pe manen income models o consump ion unde he assump ion ha pe manen income adjus s sluggishly o changes in ac ual income. 8 See IMF (2006a) o discussions on he ole o eal es a e in es men in Asian imbalances. 14 | ADB Economics Wo king Pape Se ies No. 157 Fou majo explana ions ha e been p oposed o he b oad-based weakness o in es men in he egion since he Asian c isis. Acco ding o one se o explana ions, he weakness has been he esul o linge ing e ec s om he c isis (Chinn and I o 2005 and Eicheng een (2006)]. Pos c isis es uc u ing and e o m—along wi h he wo king o o p ec isis in es men excesses—con ibu ed impo an ly o he weakness o in es men in he c isis economies in he yea s immedia ely a e he Asian c isis. A second se o explana ions o he b oad-based weakness o in es men ocus on possible compe i i e p essu e om he PRC (IMF 2006c, Wong and Adams 2002). The a gumen is ha i in es men in he PRC inc eases sha ply, he e will be cu backs elsewhe e in Asia. A hi d explana ion o he ecen weakness o in es men ela es o he ole o heigh ened egional isk in he pe iod since he Asian c isis (ADB 2007). Acco ding o one a gumen , he Asian c isis se ed as an impo an “wake up” call o economic agen s in he egion abou he isks in he in es men en i onmen . Finally, one b oad iew o he in es men weakness is ha i may e lec sho comings in he in es men clima e in he egion in he pos c isis pe iod (IMF 2006c). O e all, he weakness in in es men ac oss much o he egion in he pos c isis pe iod mus be seen as a puzzle o which he e is no clea explana ion. A guably, he Asian c isis played an impo an ole in dep essing in es men o a pe iod o ime, bu i s e ec s ha e likely waned o e ime. Nei he compe i ion om he PRC, heigh ened isk, no a de e io a ing in es men clima e has had a clea e ec . In he e en , weak in es men is no longe he key ac o unde lying he egion’s la ge o e all cu en accoun su plus. Since 2003, in pa icula , high and ising na ional sa ing has become he key con ibu o o he imbalance, especially in he case o he PRC, bu also in he cases o he newly indus ializing economies o Hong Kong, China; Singapo e; and Taipei,China. C. B e on Woods II View: Role o Highly Compe i i e Exchange Ra es The B e on Woods II iew o he imbalances seeks o explain he egion’s cu en accoun su plus in a mo e gene al equilib ium amewo k ha akes in o accoun he wo-way in e ac ions be ween economic g ow h and he su plus. The cen al assump ion o he B e on Woods II iew is ha much o de eloping Asia has implici ly e u ned o igh ly managed US dolla exchange a e egimes, ollowing a b ie li a ion wi h loa ing exchange a es du ing he Asian c isis pe iod.9 The B e on Woods II iew is ha he egion’s decision o e u n o ela i ely igid exchange a e managemen has been based mainly on a desi e o main ain highly compe i i e exchange a es so as o boos expo s and hus achie e apid g ow h. A key componen o he B e on Woods II iew is he ole o highly compe i i e exchange a es. Exchange a e compe i i eness in u n is seen as being suppo ed by sys ema ic in e en ion in he o eign exchange ma ke o pu chase US dolla s, which p o ides he ex e nal inancing equi ed by he US, o pu chase Asian expo s. 9 Hence, he usage o he e m B e on Woods II as he in en ion is o d aw an analogy o he B e on Woods sys em o pegged bu adjus able exchange a es ha was in e ec be ween 1945 and he ea ly 1970s. Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 15 Acco ding o he B e on Woods II iew, such an a angemen bene i s bo h de eloping Asia and he US. De eloping Asia bene i s inso a as i secu es ma ke s in which i can sell i s expo s, and he eby achie e apid a es o economic g ow h. The US bene i s because i can ob ain cheap ex e nal inancing ia de eloping Asia’s pu chase o low- yielding US dolla ese e asse s.10 In sho , he a angemen is seen as a posi i e-sum game o he in ol ed coun ies. The B e on Wood II iew can explain how he egion has simul aneously expe ienced apid expo and GDP g ow h, la ge cu en accoun su pluses, and apid a es o ese e accumula ion. In b oad e ms, hese a e seen as he ou come o e y compe i i e exchange a es and he necessa y accompanying mone a y and exchange a e policies. Howe e , while he B e on Woods II p o ides a mo e comp ehensi e explana ion, i also su e s om se ious sho comings and inconsis encies. In pa icula , i s cha ac e iza ion o he egion’s pos c isis exchange a e o dolla pegs o quasipegs does is di icul o squa e wi h subs an ially g ea e exchange a e lexibili y in coun ies such as Indonesia, Ko ea, and Thailand. D. Summa y Pu ing all o he a gumen s oge he , i is clea ha ou unde s anding o he ac o s unde lying he eme gence o la ge and pe sis en cu en accoun su pluses since he Asian c isis emains limi ed. Clea ly, he e is no one single explana ion o he imbalances and he ela i e con ibu ion o a ious ac o s has been di e en o e di e en subpe iods. The b oad-based weakness in in es men in he immedia e a e ma h o he Asian c isis appea s unde s andable, bu he decade-long pe sis ence o his weakness emains la gely a puzzle. The ecen su ge in egional sa ing appea mainly o be he consequence o apid egional g ow h, bu such an explana ion is incomple e inso a as i does no add ess he ac o s unde lying he apid g ow h a es. In sho , bo h he pos c isis in es men slowdown and he high and ising sa ing a es emain la gely an unexplained puzzle. IV. Consequences o Global Imbalances o De eloping Asia While he causes o Asia’s pos c isis cu en accoun su pluses emain poo ly unde s ood, he consequences o global imbalances, which pa ly e lec hose su pluses, a e all oo eal and pain ul. In addi ion o he nega i e impac o he global inancial c isis on expo s and g ow h, global imbalances en ail wo ypes o cos s o Asia. The i s is he cos s a ising om he possibili y ha Asia’s cu en accoun su plus may be subop imal. The second is he cos s associa ed wi h ha ing oo much o eign exchange ese es. A a 10 E en hough mos economies in he egion do no epo he cu ency composi ion o hei ese e holdings, US and IMF da a sugges ha he bulk o he egion’s ese es con inue o be held in US dolla asse s (Se se 2008). 16 | ADB Economics Wo king Pape Se ies No. 157 owa d expo ing inal goods ou side he egion. Mo e obus domes ic demand o inal goods wi hin egional coun ies will allow o mo e subs an i e in a egional ade along he lines o he Eu opean Union. As he egion’s incomes ise, consume s will demand mo e p oduc a ie y and his demand will c ea e a g ea e po en ial o in a-indus y ade in di e en ia ed p oduc s among egional coun ies. Finally, he ans o ma ion o de eloping Asia in o a su plus egion is no only a ela i ely ecen phenomenon bu also a puzzling phenomenon. By de ini ion, he cu en accoun su plus is equal o ne sa ings, o di e ence be ween sa ings and in es men . The e o e, he eme gence o la ge and pe sis en cu en accoun su pluses is equi alen o a widening gap be ween sa ings and in es men . While a numbe o explana ions ha e been pu o h o a well-known s ylized ac — he pos c isis in es men d op in he c isis coun ies—all o hem su e om lack o con incing heo e ical and empi ical suppo . Ano he well-known s ylized ac ha unde lies he egion’s pos c isis su pluses ( he unusually high and ising sa ing a es o he PRC and some newly indus ializing economies) also emains a puzzle ha canno be accoun ed o by he undamen al de e minan s o sa ings. In sho , much mo e esea ch needs o be done o imp o e ou unde s anding o Asia’s pos c isis cu en accoun su pluses. Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 23 Re e ences Be gs en, F., and J. Williamson. 2004. Dolla Adjus men : How Fa ? Agains Wha ? Ins i u e o In e na ional Economics. Washing on, DC. Be nanke, B. 2005. The Global Sa ing Glu and he US Cu en Accoun De ici . Boa d o Go e no s o he Fede al Rese e Sys em, Washing on, DC. Chinn, M. D., and H. I o. 2005. Cu en Accoun Balances, Financial De elopmen and Ins i u ions: Assaying he Wo ld ‘Sa ings Glu ’. NBER Wo king Pape 11761, Na ional Bu eau o Economic Resea ch, Camb idge. Coope , R. 2005. Li ing wi h Global Imbalances: A Con a ian View. IIE Policy B ie , Oc obe . Ins i u e o In e na ional Economics, Washing on DC. Dooley, M. P., D. Folke s-Landau, and P. Ga be . 2004. The Re i ed B e on Woods Sys em: The E ec s o Pe iphe y In e en ion and Rese e Managemen on In e es Ra es and Exchange Ra es in Cen e Coun ies. NBER Wo king Pape 10332, Na ional Bu eau o Economic Resea ch, Camb idge. Eicheng een, B. 2006. Global Imbalances: The Blind Men and he Elephan . Issues in Economic Policy No. 1, The B ookings Ins i u ion, Washing on, DC. Edwa ds, S. 2002. “Does he Cu en Accoun Ma e ?” In S. Edwa ds and J. A. F ankel, eds., P e en ing Cu ency C ises in Eme ging Ma ke s. Chicago: Uni e si y o Chicago P ess. . 2005a. “Is The US Cu en Accoun De ici Sus ainable? And I No , How Cos ly Is Adjus men Likely To Be?” B ookings Pape s on Economic Ac i i y 1:211–88. . 2005b. The End o La ge Cu en Accoun De ici s, 1970–2002: A e The e Lessons o he Uni ed S a es? NBERWo king Pape No. 11669, Na ional Bu eau o Economic Resea ch, Camb idge. IMF. 2005. “Global Imbalances: A Sa ing and In es men Pe spec i e.” In Wo ld Economic Ou look. In e na ional Mone a y Fund, Washing on DC. . 2006a. “The Consume Finance Boom: Is i a P oblem?” In Asia and Paci ic Regional Economic Ou look. In e na ional Mone a y Fund, Washing on, DC. . 2006b. “P i a e Consump ion in Eme ging Asia.” In Asia and Paci ic Regional Economic Ou look. In e na ional Mone a y Fund, Washing on, DC. . 2006c. “Asia’s In es men Decline: Is i Real?” In Asia and Paci ic Regional Economic Ou look. In e na ional Mone a y Fund, Washing on, DC. James, W., D. Pa k, S. Jha, J. Jongwanich, A. Te ada-Hagiwa a, and L. Sumulong. 2008. The US Financial C isis, Global Tu moil, and De eloping Asia: Is he E a o High G ow h a an End? ADB Economics Wo king Pape Se ies No. 139, Economics and Resea ch Depa men , Asian De elopmen Bank, Manila. Kujis, L. 2005. In es men and Sa ings in China. Wo ld Bank Policy Resea ch Pape Se ies No. 3633, Wo ld Bank, Washing on, DC. Mussa, M. 2004. “Exchange Ra e Adjus men s Needed o Reduce Global Paymen s Imbalances.” In C. F. Be gs en and J. Williamson, Dolla Adjus men : How Fa ? Agains Wha ? Ins i u e o In e na ional Economics, Washing on, DC. Pa k, D. 2007. Beyond Liquidi y: New Uses o De eloping Asia’s Fo eign Exchange Rese es. ERD Wo king Pape No. 109, Economics and Resea ch Depa men , Asian De elopmen Bank, Manila. . 2008. Globaliza ion, E osion o Tax Base, and he Re enue Po en ial o De eloping Asia’s Fo eign Exchange Rese e Build-Up. ERD Wo king Pape No. 122, Economics and Resea ch Depa men , Asian De elopmen Bank, Manila. Pa k, D., and K. Shin. 2009. Sa ing, In es men and Cu en Accoun Su plus in De eloping Asia. Asian De elopmen Bank, Mimeo. 24 | ADB Economics Wo king Pape Se ies No. 157 Roubini, N., and B. Se se . 2004. The US as a Ne Deb o : The Sus ainabili y o he US Ex e nal Imbalance. New Yo k Uni e si y. Mimeo. Se se , B. 2008. “Will he U.S. Cu en Accoun De ici Fall Fas e hen IMF Fo ecas s? Council on Fo eign Rela ions, mimeo. Weime , C. 2008. The Sa ing S o y behind China’s T ade Imbalance. Wo king Pape , Na ional Uni e si y o Singapo e, Singapo e. A ailable: www.lkyspp.nus.edu.sg/wp/wp08_08.pd . Wong, Y. C., and C. Adams. 2002. “T ends in Global and Regional Fo eign Di ec In es men Flows,” Pape p esen ed a he Con e ence on FDI Oppo uni ies and Challenges o Cambodia, Laos and Vie Nam, join ly o ganized by he In e na ional Mone a y Fund and he S a e Bank o Vie nam, 16-17 Augus , Hanoi, Vie Nam. Causes and Consequences o Global Imbalances: Pe spec i e om De eloping Asia | 25 Abou he Pape Cha les Adams and Donghyun Pa k examine he oo causes o he la ge and pe sis en cu en accoun su pluses ha ha e eme ged in de eloping Asia since he Asian c isis. Those su pluses en ail subs an ial cos s o he egion in e ms o bo h wel a e and g ow h. The e o e, educing excessi e dependence on expo s and laying he ounda ions o a s onge domes ic demand will make he egion be e o . Abou he Asian De elopmen Bank ADB’s ision is an Asia and Paci ic egion ee o po e y. I s mission is o help i s de eloping membe coun ies subs an ially educe po e y and imp o e he quali y o li e o hei people. Despi e he egion’s many successes, i emains home o wo hi ds o he wo ld’s poo : 1.8 billion people who li e on less han $2 a day, wi h 903 million s uggling on less han $1.25 a day. ADB is commi ed o educing po e y h ough inclusi e economic g ow h, en i onmen ally sus ainable g ow h, and egional in eg a ion. Based in Manila, ADB is owned by 67 membe s, including 48 om he egion. I s main ins umen s o helping i s de eloping membe coun ies a e policy dialogue, loans, equi y in es men s, gua an ees, g an s, and echnical assis ance. Asian De elopmen Bank 6 ADB A enue, Mandaluyong Ci y 1550 Me o Manila, Philippines www.adb.o g/economics ISSN: 1655-5252 Publica ion S ock No.: P in ed in he Philippines