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Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters

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  • Kumakura, Masanaga

Abstract

Against the background of increasing regional trade and investment, there is growing interest in monetary and macroeconomic policy coordination in East Asia. Although there is a sizable literature on macroeconomic linkages among East Asian countries and the potential merit of policy coordination in the region, the existing studies tend to examine these issues exclusively in terms of macroeconomic variables and do not consider how these aggregate variables are influenced by one prominent feature of a number of East Asian economies: their heavy dependence on the electronics industry. Although active engagement in the global electronics industry has been a powerful growth engine for the Asian countries, it has also left their economies vulnerable to cyclical fluctuations in the world electronics market. As the cycle of the global electronics industry exerts profound impacts on the medium-term dynamics of the Asian economies, it is imperative to take an explicit account of its influence when studying the way in which the regional economies are linked to one another and how this relationship can be altered by a specific policy initiative. We illustrate the importance of this point by examining recent studies on: (1) trade competition between China andother Asian countries and the role of the Chinese renminbi therein; and (2) the effect offluctuations in the yen/dollar exchange rate on the regional economies.

Suggested Citation

  • Kumakura, Masanaga, 2005. "Trade, Exchange Rates, and Macroeconomic Dynamics in East Asia: Why the Electronics Cycle Matters," IDE Discussion Papers 34, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    • Handle: RePEc:jet:dpaper:dpaper34
    as

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    References listed on IDEAS

    as
    1. Corsetti, Giancarlo & Pesenti, Paolo & Roubini, Nouriel, 1999. "What caused the Asian currency and financial crisis?," Japan and the World Economy, Elsevier, vol. 11(3), pages 305-373, October.
    2. Alan G. Ahearne & John G. Fernald & Prakash Loungani & John W. Schindler, 2003. "China and emerging Asia: comrades or competitors?," Working Paper Series WP-03-27, Federal Reserve Bank of Chicago.
    3. Mr. Marc G Quintyn & Mr. Bernard J Laurens & Mr. Hassanali Mehran & Mr. Tom Nordman, 1996. "Monetary and Exchange System Reforms in China: An Experiment in Gradualism," IMF Occasional Papers 1996/006, International Monetary Fund.
    Full references (including those not matched with items on IDEAS)

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    Cited by:

    1. Kumakura, Masanaga, 2006. "Trade and business cycle co-movements in Asia-Pacific," Journal of Asian Economics, Elsevier, vol. 17(4), pages 622-645, October.
    2. repec:lic:licosd:25710 is not listed on IDEAS

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    More about this item

    Keywords

    Electronics cycle; Export competition; Renminbi; Yen/dollar exchange rate; Electronics; International trade; Foreign exchange; East Asia; Southeast Asia; エレクトロニクス; 貿易; 外国為替; 東アジア; 東南アジア;
    All these keywords.

    JEL classification:

    • F14 - International Economics - - Trade - - - Empirical Studies of Trade
    • F15 - International Economics - - Trade - - - Economic Integration
    • F33 - International Economics - - International Finance - - - International Monetary Arrangements and Institutions

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