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Working Paper 98-6

The Global Economic Effects of the Japanese Crisis

by Marcus Noland, Peterson Institute for International Economics
and Sherman Robinson, Peterson Institute for International Economics
and Zhi Wang, Peterson Institute for International Economics

© Institute for International Economics

We would like to thank Mina Kim for research assistance.

 

Introduction

Economic performance in Japan—the world's second largest economy, the largest in Asia, and the world's largest creditor country—is going from bad to worse. Growth has essentially been flat since 1992, and the economy is now shrinking at an annualized rate of more than 3 percent. The OECD (1997) and Posen (1998) calculate that as a consequence of this prolonged period of subpar growth, Japan has accumulated a substantial "output gap" indicating that actual growth is well below potential. Given Japan's characteristics, one conservatively could expect national income to grow at approximately 2.5 percent—with a transitory period of faster growth to absorb accumulated slack.

Faster growth in Japan would not only benefit residents of Japan, but also facilitate economic recovery in the rest of Asia. Furthermore, Japanese growth would dampen political pressures in the trade arena that the US is likely to face as its trade deficit, already at historically unprecedented levels and headed toward $300 billion, widens. Japan must rekindle domestic demand, address its financial problems, and undertake structural reforms. In the wake of the bursting of the asset bubble in the early 1990s and the subsequent collapse of its investment-led expansion, the Ministry of Finance pursued fiscal policies that were at times contractionary consequently weakening domestic demand. Actual fiscal stimulus undertaken by the government between 1992-97 was only around one-third the advertised amount (Posen 1998). When a more substantial stimulus was tried in 1995, the economy responded. After consumption taxes were raised prematurely in 1997, the economy tanked.

The errors in fiscal policy have been costly, particularly since monetary policy has been rendered relatively ineffective by the "liquidity trap"—interest rates are so low that they cannot be cut further—and by the accumulated problems of the banking system, which has been saddled with $500 billion to $1 trillion in bad loans (Krugman 1998a, 1998b).

Now Japan faces a deflationary spiral. As prices fall, households and firms postpone purchases of durable goods in anticipation of lower prices in the future. Deflation contributes to high real interest rates, which in turn impede investment. With consumption and investment, the two largest components of domestic demand falling, inventories rise, prices fall, and the economy contracts. With the economy in decline, households increase precautionary saving, further depressing demand. The economy goes into a self-reinforcing spiral of contracting aggregate demand and supply.

In such a situation, the standard remedies are expansionary monetary and fiscal policies. Government spending boosts aggregate demand while an expansionary monetary policy reduces interest rate (stimulating investment), generates expectations of future price increases (discouraging postponement of expenditures on durables), and contributes to exchange rate depreciation (boosting foreign demand for domestic output). The preferred mix of policies in the current situation is subject to ongoing debate. The basic bone of contention is how Japanese households regard government spending. Some argue that they will simply increase saving to offset future tax liabilities, so that stimulus should come solely through monetary policy, though this would tend to generate a bigger exchange rate depreciation and larger trade surpluses (Meltzer 1998; Makin 1998).

Thus a weaker yen is a component of almost any adjustment scenario.1 Since Japan is the world's largest net creditor, so international financial markets cannot discipline Japan for policy errors in the way the emerging markets of Asia were punished. The real risk is that Japanese households and institutions could lose confidence in the economy and the sanctity of the financial system and Japan could experience capital flight as detailed in Posen (1998). In such a scenario, the yen would weaken precipitously as the Japanese economy was contracting. An alternative scenario could be thought of as the Krugman-Makin-Meltzer prescription in which the yen weakens in response to monetary easing as part of a macroeconomic adjustment package that generates positive growth.

Yet, since Japan is the world's second largest economy (and the largest in Asia) developments within its borders have implications not only for itself, but the rest of the world as well, particularly the rest of Asia and the United States, its largest trade partner. Indeed, the faltering Japanese economy is potentially a significant impediment to economic recovery in the rest of Asia.

In this paper we use a computable general equilibrium model to analyze some possible future trajectories of the Japanese economy and implications for Japan and the rest of the world.

We reach two fundamental conclusions:

  • The real depreciation of the yen experienced in 1998 will have significant adverse effects on the rest of Asia even if Japanese growth is restored. The reduction in the emerging surpluses of the crisis-affected countries is greater than the Japanese bilateral aid commitments under the International Monetary Fund programs in Thailand, Indonesia, and South Korea.

  • With respect to the US, developments in Japan could have significant adverse effects on output and employment in the engineering-intensive sectors of motor vehicles and parts, electronics, and machinery. If history is any guide, large, sectorally concentrated increases in bilateral trade deficits are likely to generate trade tensions.

 

Structure of the World Model

The model is a multisectoral, multicountry, computable general equilibrium (CGE) model and is part of a family of models that have been used widely to analyze the impact of global trade liberalization and structural adjustment programs.2 Our model focuses on real trade flows, trade balances, world prices, and real exchange rates. It incorporates considerable detail on sectoral output, consumption, and trade flows' both bilateral and global. However, the cost of this structural detail is that it does not consider financial markets, interest rates, or inflation; so it cannot be used to analyze the impact of the crisis on asset and money markets.3 Similarly, the model is comparative statics in nature—given the pattern of world output and trade at one moment of time, it generates what that pattern of output and trade would be after the world economy adjusted to the shocks specified in the model scenario. The model is not designed to generate quarterly macroeconomic forecasts. In principle it could be linked to a macro model that includes asset flows and could determine the set of real exchange rates resulting from a macro shock. Given a macro scenario, this model could then be used to determine the resulting real trade flows and regional sectoral structural adjustments in a comparative-statics framework.

The model includes 17 regional models,4 each with 14 sectors5 and 5 primary factors of production: agricultural land, natural resources, capital, unskilled labor, and skilled labor.6 The regions are linked by commodity trade. Within each region, the model solves for domestic commodity and factor prices that equate supply and demand in all goods and factor markets. The model also solves for world prices, equating supply and demand for sectoral exports and imports across the world economy. In addition, for each region, the model specifies an equilibrium relationship between the balance of trade (in goods and nonfactor services, or the current account balance) and the real exchange rate (which measures the average price of traded goods—exports and imports—relative to the average price of domestically produced goods sold on the domestic market). An exogenous change in a particular region's exchange rate will reverberate across the world economy, affecting the aggregate trade balances and/or real exchange rates of all 17 regions as they adjust their trade flows and structures of production to achieve a new equilibrium.

Each regional economy includes a number of economic actors. Producers are assumed to maximize profits' purchasing inputs and supplying output to both domestic and world markets (exports) in response to market prices on commodity and factor markets. Consumers receive income from firms and demand goods (and save)—responding to prices and incomes. The government collects taxes, buys goods and services, and saves (government surplus or deficit). An aggregate savings-investment account serves the function of financial markets, collecting all savings (private, government, and foreign) and allocating it for the purchase of investment goods.

It is reasonable to wonder if an equilibrium model is sufficient for analyzing adjustment to a crisis such as the one at hand. In normal operation, the regional models all assume perfect competition and complete adjustment in all markets, and, hence, solve for a new full-employment equilibrium after any shock. However, the Asian financial crisis is causing disruptions in the affected economies that are having serious effects on aggregate employment of resources. Many firms throughout the region are going bankrupt, and the rate of labor unemployment is rising. We simulate these effects by introducing negative "supply-side" shocks, reducing total factor productivity across all sectors in the affected regions. In other words, for convenience, instead of specifying increased unemployment or shutting down factories, we allow all resources to remain employed but reduce their efficiency in the model—thereby generating the same fall in output. The magnitudes of these shocks are described in more detail below as part of the scenarios we analyze.

The model determines relative prices within each region and on world markets. Traded and nontraded goods are assumed to be distinct (and imperfect substitutes) by sector, so changes in relative world market prices are only partially transmitted to domestic markets. The model thus incorporates a realistic degree of insulation of domestic commodity markets from world markets. The links are still important and provide the major mechanism by which the crisis is transmitted across regions. Since the model cannot determine inflation, only relative prices change. The United States is specified as the "reference" economy, with both its aggregate price level and exchange rate fixed. That is, all relative world prices and trade balances are measured in terms of real US dollars. In addition, the aggregate consumer price index is fixed in each region, which defines a regional "no inflation" benchmark.7

The equilibrium exchange rate determined by the model for each region can be interpreted as the real effective exchange rate (REER) deflating by the ratio of the regional consumer price index and the US index.8 It is important to emphasize that the exchange rate variable in the model is not the nominal exchange rate that one reads in the newspaper. The REER differs from the nominal rate because it takes the price level of the two countries and the structure of trade among countries into account. So, for example, if the Korean REER depreciates by 25 percent, this could reflect a 25 percent nominal depreciation of the won against the US dollar and no change in relative price levels or inflation rates, or it might reflect a 35 percent nominal depreciation of the won against the US dollar combined with a 10 percent increase in the Korean price level. In other words, movements in the REER reflect changes in both nominal exchange rates and relative price levels as well as the composition of trade, and any particular change in the REER is consistent with an infinite number of combinations of those variables. In this model, the REER is not a financial exchange rate, since the model has no assets or asset markets. The model specifies an equilibrium relationship between the real exchange rate and the trade balance, given world prices and regional export supply and import demand functions.

For each region, the model includes the three macro balances: savings-investment, balance of trade (in goods and nonfactor services), and government expenditure-receipts (government deficit). The three balances are not independent—if two of the balances are determined, the third follows from the fact that the three must always sum to zero. The determination of these macro balances is the subject of traditional macroeconomic models. In terms of our real trade model, which does not include financial markets or variables typical of macro models, the determination of these macro aggregates is specified by simple rules. The macro adjustment mechanism constitutes the macro "closure" of the model.

In the absence of any convincing analysis of the quantitative impact of the macro adjustment on different components of national income, we specify a macro closure that assumes any adjustment in aggregate absorption is spread in a neutral manner across aggregate consumption, investment, and government expenditure. Aggregate investment and government expenditure are simply specified as fixed shares of total absorption in each region (or aggregate regional expenditure, which equals gross domestic product [GDP] plus imports minus exports). Aggregate private savings in each region is assumed to adjust endogenously to match aggregate investment, thus achieving savings-investment equilibrium even with endogenous changes in the government deficit and the balance of trade.

In the aggregate, as noted above, there is a functional relationship between the balance of trade (in goods and nonfactor services, or the current account balance) in each region and the real exchange rate. If the real exchange rate depreciates, the price of traded goods increases relative to the price of domestically produced goods sold on the domestic market. Exports increase, imports decrease, and the trade balance will improve. Given our assumption that aggregate investment is determined as a share of aggregate absorption, changes in the trade balance, which directly affect foreign savings, are assumed to have only a partial effect on aggregate investment in the region. Instead, they lead to an equilibrium adjustment in the domestic savings rate, which partially offsets the change in foreign savings.

In the model, we specify a fixed real exchange rate for each region. In the base solution, calibrated to 1995 (the most recent year for which a Chinese social accounting matrix can be constructed), the initial trade balance and exchange rate are assumed to be in equilibrium for each region—that is, the initial trade balance is assumed to be "sustainable" and consistent with the initial real exchange rate. In simulation experiments, we change the exchange rate for a particular region, which changes the equilibrium trade balance both in aggregate and bilaterally. In the multiregion model, there is a ripple effect, since, as noted in the previous chapter, a depreciation in one region's real exchange rate implies a relative appreciation for its trading partners, which also leads to changes in their equilibrium trade balances. The world model is closed in the sense that the sum of all regional trade balances must equal zero. Thus, we can use the model to see how real exchange rate shocks lead to adjustments in country trade balances worldwide in a consistent framework.

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Modeling Scenarios

We model the Asian financial crisis as a combination of real exchange rate depreciations and supply-side contractions, due to domestic financial disintermediation which impedes the affected countries' ability to respond to the real exchange rate change. In this application we program a set of real exchange rate changes and supply-side shocks approximating what occurred between July 1997 and June 1998.9 This forms scenario 1—the Asian financial crisis without any response on the part of Japan.

We then examine three Japan-specific scenarios. First, we subject Japan to a 10 percent real exchange rate depreciation and a 2 percent negative supply-side shock, approximating what occurred in Japan between July 1997 and June 1998. (Given what has occurred in the other economies, the real exchange rate depreciation would be equivalent to a yen-dollar rate of around 135.) We then look at two additional scenarios. Scenario 3 could be thought of as Posen's capital flight scenario—the yen weakens further and the economy's slump deepens. In this scenario Japan experiences a real depreciation of 20 percent (roughly equivalent to a yen-dollar rate of 155) and a negative total factor productivity shock of 4 percent. Scenario 4 could be thought of as the Krugman-Meltzer-Makin scenario of aggressive monetary expansion as part of a recovery package. Real activity increases by 3 percent and the real exchange rate depreciates by 30 percent.

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Results

Tables 1- 7 report results for the four scenarios described above. Changes in global trade balances for seven aggregated regions are given in table 1, and some key bilateral balances are shown in table 2. Tables 3 and 4 report Japanese sectoral output and trade effects obtained from the four scenarios, while the equivalent results obtained for the US are reported in tables 5 and 6. US-Japan sectoral bilateral balances are shown in table 7.

The Asian financial crisis affects Japan in subtle ways. The events in the rest of Asia summarized in scenario 1, tend to depress output and exports in sectors such as machinery which are tightly linked to the rest of Asia. However, sectors such as motor vehicles, which have tighter links to less affected regions of the world, benefit substantially when the yen depreciates in scenario 2.

As shown in table 1, the effect of the crisis in the rest of Asia is to reduce Japan's trade surplus by roughly $33 billion. (The figures are annualized numbers once adjustment has occurred. One could interpret these as approximating what might be observed in calendar year 1999.) However, the subsequent depreciation of the yen and contraction in Japan in scenario 2 more than compensate for this and Japan experiences a nearly $90 billion swing in its trade position relative to scenario 1, or about $55 billion relative to the base. Japan increases its bilateral surplus with the US by $25 billion (table 2). Output, which had been depressed throughout the traded-goods sector due to events in Asia, recovers strongly in some sectors, with output increasing more than 5 percent in motor vehicles and parts and other transportation equipment relative to the base. The biggest sectoral increases in trade balances occur in the motor vehicles and parts sector, which experiences an export boom, and the services sector, where the exchange rate depreciation and the reduction in domestic economic activity suppress imports.

For the US, the impact of the crisis thus far as summarized in scenario 2 is to increase its global trade deficit by $58 billion (table 1), most of this coming through trade with Japan ($25 billion) and Korea (around $10 billion) (table 2). Output falls throughout the traded-goods sectors (particularly in machinery and electronics), but rises in the non-traded goods sectors (table 5). The biggest deterioration in sectoral trade balance is experienced by the machinery sector where net exports decline by more than $14 billion (table 6). This is largely due to a decline in exports to Asia as a result of the collapse of investment in the region together with the declining competitiveness of US capital goods exports due to the real exchange rate appreciation experienced by the US. In terms of the bilateral balance with Japan, the sector most adversely affected is motor vehicles and parts, where net exports fall nearly $8 billion, accounting for about one-third of the deterioration in the US bilateral balance with Japan (table 7).

With respect to the rest of Asia, the depreciation of the yen and the contraction of economic activity in Japan in scenario 2 partly reverses the improvement in the trade balances of developing Asia, eroding the positive swings in their trade balances with Japan (tables 1 and 2). Moreover, Japan gains market share in third country markets such as the US. Indeed, relative to scenario 1, developing Asia loses more under scenario 2 than the $19 billion Japan pledged in the "second line of defense" commitments as part of the International Monetary Fund's programs in Thailand, Indonesia, and Korea.

Having examined the implications of develops already in train, we now consider two alternative scenarios for Japan. In scenario 3, Japan experiences a 20 percent real depreciation and a 4 percent negative total factor productivity shock. The Japanese trade surplus increases by another $80 billion or by $135 billion relative to the base (table 1). The external balances of the US and Western Europe each deteriorate by an additional $20-25 billion, and that of developing Asia by nearly as much, relative to the previous experiment. As shown in table 2, Korean trade gains vis-à-vis Japan are completely wiped out under this scenario. Output increases by nearly 14 percent in the other transportation equipment sector, and more than 12 percent in motor vehicles and parts where the global sectoral trade balance increases by more than $26 billion, more than half of this with the US (tables 3, 4, and 7). As Japanese firms take market share in US, Japanese, and third country markets, US output in the machinery sector falls by nearly 6 percent, and in both the electronics and motor vehicles and parts sectors by nearly 5 percent (table 5).

In the fourth scenario, the yen depreciates 30 percent in real terms and Japanese output increases by 3 percent. Although the increase in Japanese activity partly offsets the impact of the depreciation, the relative price effect through the exchange rate change still predominates. In this scenario, Japan still reduces the global trade surplus of developing Asia by more than the bilateral aid commitments (table 1). (Indeed, relative to scenario 1, more than one-third of the Asian increase in external balances is eliminated.) In the US, output falls by nearly 8 percent in both motor vehicles and machinery (table 5), as the bilateral deficit in motor vehicles and parts increases by nearly $22 billion and the deficit in machinery by nearly $16 billion (table 7).

While it is certainly true that more robust growth in Japan could have beneficial externalities not captured by this model (by facilitating resolution of the Japanese banking problems and restoration of capital flows to the rest of Asia for example), the evidence from the real side of the economy does not support the proposition that Asia and the rest of the world would be better off with substantially more yen depreciation, even if accompanied by growth in Japan.

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Conclusions

This paper has used a computable general equilibrium model to analyze the impact of the Asian crisis thus far, and the implications of possible developments in Japan. We reach two fundamental conclusions. First, real depreciation of the yen will have significant adverse effects on the rest of Asia, even if Japanese growth is restored. The reduction in the emerging surpluses of the crisis-affected countries is greater than the Japanese bilateral aid commitments under the International Monetary Fund programs in Thailand, Indonesia, and South Korea.

Increases in external balances will inevitably be a component of the Asian countries' recoveries, both due to their need to service their outstanding foreign debt, as well as their need to offset the contraction of domestic demand that they are experiencing. The industrial countries should expect their trade deficits with these countries to widen in the next few years as an unavoidable aspect of the global adjustment process induced by the Asian crisis and a necessary component of the Asian countries' recoveries. A weak yen shifts this adjustment, primarily onto the US and Western Europe. In this respect there is need for burden-sharing, and the industrialized economies should consider consultation and a coordinated macroeconomic response to this emerging situation.

Second, with regard to the US, developments in Japan could have significant adverse effects on output and employment in the engineering-intensive sectors of motor vehicles and parts, electronics, and machinery. Noland (1996, 1997) has shown that the single biggest predictor of bilateral trade conflict is bilateral balances. Moreover, the likelihood of conflict is greater when the imbalances are concentrated, especially in sectors where there are relatively few producers and hence the coordination costs of political lobbying are low. The results reported in this paper which indicate that adjustment in Japan could generate large increases in the bilateral imbalances in engineering-intensive sectors such as motor vehicles would appear to be a recipe for trade conflict.

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Annex

In each regional model, production is characterized by a two-level nesting of constant elasticity of substitution (CES) functions. At the first level, firms are assumed to use two types of inputs, a composite primary factor and an aggregate intermediate input, with a CES cost function. At the second level, the split of intermediate demand is assumed to follow a Leontief specification, with no substitution among intermediate inputs. Technology in all sectors exhibit constant return to scale. Output is sold on the domestic market or exported to other regions according to a constant elasticity of transformation (CET) function.10

Agents in each region view products from different regions as imperfect substitutes (the Armington assumption). The private household in each region maximizes a Stone-Geary utility function over the 14 composite goods, subject to their budget constraints, which leads to the Extended Liner Expenditure System (ELES) of household demand functions. Household savings are treated as demand for future consumption goods (Howe 1975). An economy-wide consumer price index is specified as the price of savings. It represents the opportunity cost of giving up current consumption in exchange for future consumption (Wang and Kinsey 1994). Government spending and investment decisions in each region are based on Cobb-Douglas utility functions, which generate constant expenditure shares for each composite commodity. In each region, firm intermediate inputs, household consumption, government spending and investment demand constitute total demand for the same Armington composite of domestic products and imported goods from different sources. A two-level nested CES aggregation function is specified for each composite commodity in each region. Total demand is first divided between domestic produced and imported goods, then the expenditure on imports is further divided according to the geographical origin under the assumption of cost minimization. Complete trade flow matrices for all trade partners are part of the model solution.

There is an international shipping industry in the model to transport products from one region to another. Each region is assumed to allocate a fraction of the output of its transportation and service sector to satisfy the demand for shipping which is generated by interregional trade. The global shipping industry is assumed to have a unitary elasticity of substitution among supplier sources. This means that the margins associated with this activity are commodity/route specific. In equilibrium, the total value of international transportation services at the world price equals the sum of the export proportions of the service sector's output from each region.

The government in each region is assumed to impose import tariffs, export subsidies, and indirect taxes, all in ad valorem terms. Tariff and tax (subsidy) rates vary by sector and by destination. Quantitative restrictions on trade are converted to tariff-equivalents. A complete algebraic rendition of the model is presented in Noland, Liu, Robinson, and Wang (1998), appendix A.

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Notes

1. An internationally coordinated interest rate cut would presumably affect the nominal (and real) exchange rates and might mitigate some of the pure yen depreciation effects modeled in this paper.

2. The model is fully specified in Noland, Liu, Robinson, and Wang (1998), appendix A. A brief description is contained in the annex of this paper.

3. McKibbin (1998) reports a model that explicitly models financial markets in an intertemporal context, at the cost of ignoring much of the underlying structural changes that our model captures.

4. The regions in the model are: the United States (USA), Canada (CAN), Mexico (MEX), Western Europe (WEU), Australia and New Zealand (OCN), Japan (JPN), South Korea (KOR), Taiwan (TWN), China and Hong Kong (CHN), Indonesia (IDN), Thailand (THA), the Philippines (PHL), Singapore (SGP), Malaysia (MYS), South Asia (SAS), Latin America and the Caribbean countries (LTA), and the rest of the world (ROW).

5. The sectors are agricultural products, processed food and beverages, forestry and fisheries, mining, energy, textile and apparel, light manufactures, industrial intermediates, motor vehicles and parts, other transportation equipment, electronics, machinery, housing and construction, and services.

6. Skilled workers are defined as International Labor Office (ILO) International Standard Classification of Occupations (ISCO) occupation groups 0-2 (Professional; Technical and related workers; Administrative and managerial workers). The remainder are ISCO 3-5 (Clerical and related workers; Sales workers; Service workers), ISCO 6 (Agricultural workers), and ISCO 7-9 (Production and related workers; Transport equipment operators; Laborers) are classified as unskilled.

7. Formally, the consumer price index is the "numeraire" price index for each region, and the US exchange rate is selected as the "numeraire" for world prices.

8. For another application of this notion, see Wren-Lewis and Driver (1998).

9. The real exchange rate and total factor productivity shocks are Thailand (-25, -5); Malaysia (-25, -5); Indonesia (-30, -10); the Philippines (-25, -5); South Korea (-15, -5); Taiwan (-5, 0); Singapore (-5, 0); Oceania (-10; 0). Noland, Liu, Robinson, Wang (1998) discuss the difficulties in calibrating these shocks and summarize results derived from sensitivity analyses.

10. The CET function can be partially or entirely turned off in the model, in such case, exports and domestic sales become perfect substitutes.

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References

Howe, Howard. 1975. Development of the Extended Linear Expenditure System from Simple Saving Assumptions. European Economic Review 6: 305-10.

Krugman, Paul R. 1998a. Japan's Trap. MIT. http://web.mit.edu/krugman/www/japtrap.html (May).

Krugman, Paul R. 1998b. Further Notes on Japan's Liquidity Trap. MIT. http://web.mit.edu/krugman/www/liquid.html.

McKibbin, Warwick. 1998. The Crisis in Asia: An Empirical Assessment. Brookings Discussion Paper in International Economics No. 136. Washington: Brookings Institution.

Meltzer, Allan. 1998. Time to Print Money. Financial Times (17 July).

Makin, John. 1998. Mr. Greenspan's Dilemma. Washington: American Enterprise Institute for Public Policy Research (August).

Noland, Marcus. 1996. Trade, Investment, and Economic Conflict Between the US and Asia. Journal of Asian Economics 7, no. 3: 435-58.

Noland, Marcus. 1997. Chasing Phantoms: The Political Economy of USTR. International Organization 51, no. 3: 365-88.

Noland, Marcus, Li-Gang Liu, Sherman Robinson, and Zhi Wang. 1998. The Global Economic Effects of the Asian Currency Devaluations. Washington: Institute for International Economics.

Organization for Economic Cooperation and Development (OECD). 1997. Economic Outlook. Paris: OECD (November).

Posen, Adam. 1998. Restoring Japan's Economic Growth. Washington: Institute for International Economics.

Wang, Zhi, and Jean Kinsey. 1994. Consumption and Saving Behavior under Strict and Partial Rationing. China Economic Review 5: 83-100.

Wren-Lewis, Simon, and Rebecca L. Driver. 1998. Real Exchange Rates for the Year 2000. Washington: Institute for International Economics.


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