Global financial crisis and east asian growth model revisited:twelve years of change since 1997 economic crisis and alternative model

Abstract

The Lehman shock and its aftermath in 2008 and 2009 have given us many lessons. Financial turmoil and the sudden drop of exports to US and European economies have brought a lot of difficulties for East Asian countries. Reliance on exports, especially exports of finished goods to US and European markets, and also reliance on US financial markets made the Lehman shock contagious to East Asian economies where actually no financial crisis took place in 2008 and 2009. This time, the global financial crisis made us more conscious of the current structure of the East Asian economy. Export is important always, however, domestic and regional demand, and importance of consumption, and investment have been felt, and recognized this time. Now these countries have high ratios of current account surplus, and somewhat large gaps between supply and demand, or between savings and investment. Former characteristics of having low saving rates, and little capital are now an old story. These countries have now high saving ratio, and somewhat less consumption. Higher saving ration than investment means less demand compared with much supply, and less investment compared with much saving.