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WORKING PAPER 09-11

The Impact of the Financial Crisis on Emerging Asia

by Morris Goldstein, Peterson Institute for International Economics
and Daniel Xie, Peterson Institute for International Economics

This paper analyzes how the global financial crisis has impacted emerging Asia and identifies key characteristics that have made these economies more or less vulnerable to a transmission of crises from the advanced economies. After reviewing how economic outcomes in emerging Asia have evolved since the crisis began in the summer of 2007, Morris Goldstein and Daniel Xie review several studies of the effect of financial stress and/or growth slowdown in advanced economies on emerging Asia. They then discuss how emerging Asia is "different" in ways that matter for the contagion of crises, with the emphasis on currency and maturity mismatches, the nature of the region’s foreign trade links (product composition, the geographic pattern of trade, and the degree of net export-led growth), financial market integration with the advanced economies, and the scope for implementing countercyclical monetary and fiscal stimulus.

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