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Macroeconomic Shocks and Unconventional Monetary PolicyImpacts on Emerging Markets$
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Naoyuki Yoshino, Pornpinun Chantapacdepong, and Matthias Helble

Print publication date: 2019

Print ISBN-13: 9780198838104

Published to Oxford Scholarship Online: August 2019

DOI: 10.1093/oso/9780198838104.001.0001

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PRINTED FROM OXFORD SCHOLARSHIP ONLINE (oxford.universitypressscholarship.com). (c) Copyright Oxford University Press, 2020. All Rights Reserved. An individual user may print out a PDF of a single chapter of a monograph in OSO for personal use. date: 22 October 2020

Ultra-Low Interest Rates and Growth in Emerging East Asia from a Hayekian Perspective

Ultra-Low Interest Rates and Growth in Emerging East Asia from a Hayekian Perspective

Chapter:
(p.294) 13 Ultra-Low Interest Rates and Growth in Emerging East Asia from a Hayekian Perspective
Source:
Macroeconomic Shocks and Unconventional Monetary Policy
Author(s):

Gunther Schnabl

Publisher:
Oxford University Press
DOI:10.1093/oso/9780198838104.003.0013

The chapter 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 paralyses growth in the long term, as Japan experienced.

Keywords:   monetary policy, ultra-low interest rate, overinvestment, real estate market, East Asia

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