The Impact of Financial Crisis on Economic Growth:Case of Asian Countries
Date Issued
2011
Date
2011
Author(s)
Lin, Ming-Chuan
Abstract
Since the East Asia financial crisis in late 1990s, several studies have investigated the relationship of capital inflow and external debt to economic growth in emerging markets. There are several various points of view toward the effect of capital inflow, but external debt has been widely believed to increase the risk of financial crisis. In this paper, we investigate the effect of capital inflow and external debt on financial crisis and its long run effect on economic growth using 10 countries (Japan, China, Taiwan, South Korea, Philippines, Singapore, Malaysia, Vietnam, Indonesia and Thailand) in Asia spanning from 1970 to 2009. Our empirical findings suggest higher capital inflow and external debt ratio would result in higher possibility of financial crisis, although the strength of the association strongly depends on the country’s foreign reserve and other macroeconomic fundamentals. We also find that capital inflow has positive effect in the short run, while no matter in the short or long run, financial crisis triggered by the external debt has a negative effect on economic growth.
Subjects
Foreign capital inflow
external debt
economic growth
financial crisis
macroeconomic fundamentals
SDGs
Type
thesis
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