07. Exam - International Trade and Growth in Asian Economies Flashcards Preview

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Flashcards in 07. Exam - International Trade and Growth in Asian Economies Deck (26)
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1
Q

Which Asian countries are included in the term High Performing Asian Economies (HPAE)?

A

1) Hong Kong
2) Singapore
3) Thailand
4) Taiwan
5) Japan
6) Indonesia
7) Malaysia
8) South Korea

2
Q

What are the Four Tigers and what are they also known?

A

Hong Kong; Singapore; Thailand & Taiwan - also known as four dragons or little dragons. They are the newly industrialised economies (NIE).

3
Q

Is China a NIE?

A

Yes it could be but it is usually placed in its own category due to its size and the legacy of communism.

4
Q

What re the Characteristics of a HPAE?

A
  • able to maintain stable macroeconomic environment
  • strong commitment to shared economic growth through health care, education and housing
  • promotes exports and remains open to imports
  • exports provide foreign exchange earnings.
5
Q

Explain the population, income and economic growth of the HPAEs?

A
  • High GDP per person in Singapore, Japan, HK, Taiwan and Sth Korea
  • Thailand, Indonesia and Malaysia began their growth later.
  • Asian economies were among the fastest growing in the world between the 80s and 90s.
6
Q

Briefly explain the position of Hong Kong?

A

On 1 July 1997, GB returned the colony to China after more than 150 years of British rule. China will:

  • allow HK to keep its own currency
  • limit migration between HK and the mainland
  • generally try and preserve HK’s current system.
7
Q

What are the general characteristics of growth in the HPAE?

A
  • shared growth - rising economic equality
  • rapid accumulation of physical and human capital (high savings partly as a result of rapid demographic transition experienced after WWII)
  • rapid growth of manufactured exports (import substitution industrialisation (ISI) policies were quickly replaced with an emphasis on export promotion
  • stable macroeconomic environments.
8
Q

HPAEs have high rates of investment thanks to high savings rates which stem from what four reasons?

A
  • stable macroeconomic environment of low inflation
  • rapid rate of income growth
  • demographic transition: shift to low death & birth rates
9
Q

Explain the difference between HPAE exports in 1965 and 2000?

A

Between 1965 to 2000 they doubled and became a major share of world exports 21.3% (19.9% merchandise)

10
Q

Why do HPAEs have stable macroeconomic environments?

A
  • HPAEs kept budget deficits and foreign debt within limits so govt. could finance without having to print money or borrow excessively.
  • low inflation rates helped keep interest rates stable and enabled firms to take a long term view on investing
11
Q

Explain seven aspects of the Institutional Environment for HPAEs?

A
  • large flows of savings channelled into financial system
  • govt created rules that foster efficient outcomes
  • reliable property rights
  • bureaucracies are competent
  • contracts are enforced
  • access to information is wide-spread
  • regulations are clear and well publicised
12
Q

To maintain a stable macroeconomic environment what is required by the government?

A
  • fiscal discipline and an acceptance of the resource constraints that limit govt. actions
  • budget deficits and foreign debt kept @ manageable levels
  • real exchange rate must be kept relatively stable.
    These increase confidence in the govt. which in turn encourages investment and less capital flight.
13
Q

What are deliberation councils?

A

Quasi-legislative bodies set up by six HPAE governments that bring together representatives from the public and private sectors.

14
Q

What is the role of the deliberation council? (6)

A
  • coordinate information flow between business men and policy makers
  • reduce the cost of acquiring info about new policies
  • provide a forum for bargaining over policies
  • instil greater investor confidence
  • raise the level of credibility of govt. policies; and
  • allow the business elite a strong voice in setting policy which thereby ensures their cooperation in the overall economic strategy.
15
Q

Government interventions are common in three areas in HPAES, these include?

A

Targeting of specific industries or to channel resources in a particular direction through:

  • credit subsidies
  • import protections
  • business licenses
16
Q

What is the role of industrial policies?

A

1) targeting of specific industries (narrowly defined industrial policies)
2) directed credit
3) export promotion

17
Q

With the first role of industrial policies - targeting of specific industries in the HPAE, what six tools have been used?

A
  • restrictions on imports (licensing, quotas, tariffs, export subsidies)
  • direct credit (funds to an industry)
  • subsidies
  • Market information (especially foreign)
  • infrastructure construction
  • research and development funds.
18
Q

What is placed above industrial policy?

A

Macroeconomic stability

19
Q

What is the outcome of a successful industrial policy?

A

Increase the overall rate of GDP grow or the rate of productivity growth.

20
Q

What is the World Bank’s view on the industrial policies and their ability to increase GDP growth? and what is the critics response?

A

Export promotion and directed credit work to boost economic growth but other policies did not. Critics respond by saying it is impossible to know what the growth rates would have been without those policies.

21
Q

What are the three areas of general agreement with regards to successful industrial policies and their traits?

A
  • they have clear performance criteria such as export targets
  • institutional means to monitor and enforce compliance
  • low costs in order for non-targeted sectors not to suffer.
22
Q

What are the connections between growth and exports?

A
  • export growth won’t add to GDP growth if it crowds out growth of goods for domestic consumption
  • export growth causes faster GDP growth
  • export growth causes the overall capacity of the economy to grow faster than what it would if production was focused on goods for the domestic market.
23
Q

Promotion of exports results in greater GDP growth only if there are two key factors in place - what are they?

A
  • there is something in the production that would otherwise be absent from producing for the domestic market such as:
    • economies of scale from larger market
    • added incentives to increase R&D
    • foreign competition
  • exporting also:
    • speeds up the adoption of inter. best practices
    • makes possible purchase of imports
    • encourages the adoption of new technology.
24
Q

What is the most critical ingredient in policies that successfully close the gap between developing and developed countries?

A
  • ability to import capital and modern technology.
25
Q

Is export promotion a good model for other developing regions?

A

Probably not because:

  • requires world’s industrial nations to absorb the exports and without balance on imports deficits would be created; and
  • developing countries must eliminate subsidies that are contingent on export performance (Uruguay Round 94) which means they cannot use credit subsidies, tax breaks and direct payments to replicate the success.
26
Q

What is responsible for East Asia’s remarkable growth per capita?

A

The bulk of the east Asian growth is attributable to increases in capital and education. It is not attributable to Total Factor Productivity (TFP) which is a measure of the quantity of output per unit of input. Increases in TFP mean that overall productivity has improved and that a given level of inputs will create more output.