Author Question: Compare macroeconomic policies in the high-growth Asian economies with policies in the rest of the ... (Read 109 times)

ec501234

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Compare macroeconomic policies in the high-growth Asian economies with policies in the rest of the world.
 
  What will be an ideal response?

Question 2

How did the global supply of savings impact the formation of the housing bubble?
 
  What will be an ideal response?



uniquea123

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Answer to Question 1

These economies have prioritized the maintenance of stable macroeconomic environments. On average, budget deficits and foreign debt were not dramatically smaller than in other regions of the world, although there was a significant amount of variation across countries. The difference in the export-oriented economies, however, is that with the exception of the 1997-1998 crisis, deficits and debts remained manageable. High growth rates helped ease the constraints imposed by a given level of debt, partly because the high levels of exports earned the foreign assets necessary for debt servicing. The commitment to low inflation helped keep real interest rates stable and enabled firms to take a longer-run view of their investments. In addition, low inflation helped avoid severe real appreciations in the exchange rate. Low inflation also meant that variations in the real exchange rate, the real interest rate, and the inflation rate were relatively low.

Answer to Question 2

Interest rates were lower and demand for housing higher than it would have been otherwise.



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