Affiliation:
1. Faculty of Business Administration University of Macau Macao SAR China
2. School of Economics Southwest University of Political Science & Law Chongqing China
Abstract
AbstractThis paper studies 10 Asian economies' experiences during two episodes of financial crises in 1997–08 and 2007–09. Our analysis of five crisis‐hit Asian countries shows that overinvestment via credit expansion and foreign financing has an adverse effect on banking sectors while income inequality contributes significantly to financial distress. With five no‐crisis emerging markets included in our Asia analysis, we find that export‐oriented growth backed up by domestic savings is financially less risky than investment‐led growth facilitated by capital inflows. Since such different strategies of output growth to deal with falling demand are related ultimately to the same factor–rising inequality, this distributional problem must be overcome effectively to enhance financial stability and ensure growth sustainability.
Subject
Economics and Econometrics,Finance,Accounting