The Extent of Growth Dependence of Selected East Asian Economies on the USA

Abstract

This paper assesses the extent of economic growth dependence of a number of East Asian countries on the USA based upon the quarterly data series spanning from the early 1990s. Generally, the empirical results suggest weak links of these economies to the US contrary to a-priori expectations. Only the GDP of Taiwan has a long-run relationship with the USA. Though Granger causal links from the USA to Japan, Malaysia, the Philippines and Taiwan exist, they are projected as weak by the impulse response functions. Co-integration and short-run causal links with the USA are ruled out in the case of China, Hong Kong, South Korea, Singapore and Thailand. Contemporaneous correlations of output growth shocks merely exist between the USA on one hand and Indonesia and Taiwan on the other. Hence, all this would suggest that these East Asian economies are generally in a position to grow quite independently of the USA, barring a global economic crisis. Nevertheless, they should strive for greater resilience by raising domestic consumption so that they need not always count on countercyclical macroeconomic policy measures to provide a buffer against external shocks.