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ECOS 2025

EAST ASIAN ECONOMIES

End of Semester Examination

Semester 2 – 2015

Section A

1. There are many features of East Asian growth experiences. But, one of the following is not a well-documented feature of their growth experiences. Which is it?

a. Governments directed resources to realize growth potential.

b. Governments used policies of import substitution to protect domestic industries.

c. Governments often relied on foreign investments and technologies.

d. Government focus was on savings and capital accumulation rather than consumption.

e. None of the above.

2. Suppose that the PPP based per capita income of Japan is about 4 times that of China. The Chinese government wants to catch up with the per capita income of Japan in 20 years. At what rate should China continue to grow to achieve this, if Japan stops growing for the next 20 years?

a. 5% pa approximately

b. 7% pa approximately

c. 10% pa approximately

d. 12% pa approximately

e. 20% pa approximately

3. The asset price bubble in Japan prior to 1990 was largely due to

a. large depreciation of yen

b. large fiscal surpluses

c. prolonged monetary expansion

d. high growth rates in total factor productivity

e. all of the above

4. Which of the following pairs of leader and country is not associated with strong growth?

a. Park Cung Hee and South Korea

b. Lee Kuan Yew and Singapore

c. Mahathir Mohamad and Malaysia

d. Mao Zedong and China

e. All of the above

5. During the Asian financial crisis, the international monetary fund (IMF) prescribed policies of

a. stimulating domestic demand using monetary policy

b. fiscal expansions to prevent a prolonged recession

c. high interest rates and fiscal austerity

d. capital control to stabilize exchange rates

e. None of the above.

6. Which of the following is not what happened during the Maoist era?

a. Resources were re-directed to heavy industry from agriculture.

b. Urban-rural income gap was significantly narrowed.

c. Discretionary consumption goods were taxed highly.

d. Basic health and education were supported.

e. Service sector was largely neglected.

Section B

Either

Question 1

This question has two part of equal mark. Answer all two parts.

(a) Explain to what extent the neoclassical growth theory (e.g. Solow Swan model) that emphasize capital accumulation and total factor productivity can explain the East Asian growth ‘miracles’ with particular references to the growth experiences of Korea and Singapore. Illustrate your answer with the aid of an appropriate model diagram(s).

(b) Explain using a model of exchange rate determination how speculative attacks occur and trigger a currency crisis and then illustrate using the interest parity condition why high interest rates were required to defend the value of local currency in the Asian financial crisis.

Or

Question 2

This question has four parts of equal mark. Answer all parts below.

Your answer must be clear and succinct.

(a) What is the Chiang Mai Initiative (CMI)? Also, outline its role in the post crisis period.

(b) Outline the Abenomics and the possible limitations associated with the policy

(c) Outline the domestic and external factors associated with the Asian financial crisis.

(d) China has shown persistently high investment and low consumption (as a share of GDP). Why would this be a matter for concern?

Section C

In this course, you studied growth experiences across a number of East Asian economies (mainly three North East Asian countries: Japan, Korea and China, and three South East Asian countries: Singapore, Malaysia and Indonesia).

Compare and contrast their growth strategies and policies outlining similarities and differences. And then critically evaluate ‘the Asian Model’ with reference to their historical growth experiences as well as where they currently stand (both successes and failures). Discuss how non-economic (such as political and cultural) institutions may help us better understand East Asian economies. Your essay should be logically developed and coherent.