Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/163215
Authors: 
Schnabl, Gunther
Year of Publication: 
2017
Series/Report no.: 
ADBI Working Paper Series 706
Abstract: 
The paper explores business cycles and growth dynamics in emerging East Asia within an ultra-low interest rate environment from the perspective of the monetary overinvestment theories of Mises and Hayek. It argues that, given a low interest rate environment in the large industrialized countries, the likelihood of overinvestment and therefore a crisis in emerging East Asia has increased independently from the exchange rate regime. Overinvestment can take the form of unsustainable booms on stock and real estate markets (as in Southeast Asia prior to the Asian crisis) or the misallocation of funds due to subsidized state-directed capital allocation (as is currently occurring in the People's Republic of China). If further credit expansion counteracts a crisis triggered by a preceding overinvestment boom, it paralyzes growth in the long term, as Japan experienced.
Subjects: 
Economics
Finance sector development
China, People's Republic of
Indonesia
Japan
Korea, Republic of
Malaysia
Philippines
Thailand
JEL: 
E52
E58
F31
Creative Commons License: 
https://creativecommons.org/licenses/by-nc-nd/3.0/igo/
Document Type: 
Working Paper

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