1.3 Oil Price Windfall: Impact on the Oil Trade Balance in Selected Asia: Inflation Decomposition of the CPI Basket

Transcription

1 List of Figures 1.1 Real GDP Growth 1. Asia: Contribution to World Real GDP Growth 1.3 Oil Price Windfall: Impact on the Oil Trade Balance in Impact of Oil Price Decline on Macro Forecasts 1.5 Selected Asia: Inflation Decomposition of the CPI Basket 1.6 Selected Asia: Exchange Rates 1.7 Asia: Commodity Exports and Exchange Rate Movements 1.8 Selected Asia: Change in Exchange Rates and Reserves 1.9 Asia: Exchange Market Pressure Index 1.1 Selected Asia: Credit by All Providers to the Nonfinancial Private Sector 1.11 Asia: Equity and Bond Funds Monthly Net Flows 1.1 Asia: Financial Account Balances 1.13 Selected Asia: Foreign Exchange Reserve Accumulation 1.14 Selected Asia: Private Sector Credit Growth 1.15 Asia: Sovereign Bond Yields 1.16 Selected Asia: Real Policy Rates 1.17 Asia Financial Stability Heat Map 1.18 Asia: Output Gap versus Credit Gap 1.19 Asia: Nonfinancial Corporate Sector Potential Vulnerabilities, Selected Asia: Debt-to-Equity Ratio for All Firms (both listed and unlisted firms) 1.1 Stock of Outstanding Bonds and Syndicated Loans in Foreign Currency End- 14

2 1. Stock of Outstanding Bonds and Syndicated Loans in Foreign Currency End Selected Asia: Tier 1 Capital Ratio Latest 1.4 China: Potential Growth Decomposition 1.5 China: Growth Slowing Down 1.6 China: Social Financing Stock 1.7 Asia: Stock Markets 1.8 Japan: Real GDP Growth and Inflation 1.9 India: Current Account, Fiscal Balance, and Inflation 1.3 Asia: Changes in Real GDP at Market Prices 1.31 Selected Asia: Exports to Major Destinations 1.3 Selected Asia: Contributions to Projected Growth 1.33 Asia: Contributions to Change in Headline Inflation in Selected Asia: Real GDP Growth and Output Gap 1.35 Asia: Headline Inflation 1.36 Selected Asia: Policy Rate Actions 1.37 Asia: Estimated Central Bank Reaction Functions 1.38 Selected Asia: Cyclically Adjusted Fiscal Balance 1.39 Asia: Real GDP Growth Selected Asia: Export Growth Rates 1.1. Deviation of Trading Partner s Demand in 14 from the Trend Japan: Trading Partners Demand Long-Term Export Income Elasticity

3 1..1 World: Headline Consumer Price Index Inflation 1.. Three Latent Common Factors 1..3 Factor 1 and Commodity Prices 1..4 Factor : Great Inflation Moderation 1..5 Factor 3 and U.S. Nominal Effective Exchange Rate (NEER) 1..6 Loading Coefficients of Factors 1,, and 3 in Asia 1..7 Variability of Inflation Explained by the Common Factors 1..8 Asia: Actual and Common-Origin Inflation 1..9 Asia: Actual and Common-Origin Inflation Credit Intensity of GDP: Pre and Post Global Financial Crisis 1.3. Debt-to-Equity Ratio: Pre and Post Global Financial Crisis Cash-to-Debt Ratio: Pre and Post Global Financial Crisis Selected Asia: Financial Conditions Indexes Responses of Key Variables to Global Financial Market Volatility Shocks Residential Real Estate: Market Conditions 1.6. Residential Real Estate: Inventory Ratio Residential Real Estate: Baseline Adjustment Scenario Residential Real Estate: Investment and Housing Starts Yen Effective Exchange Rates Movement 1.7. Developments in Yen/Won Cross Exchange Rate and Won Real Effective Exchange Rate Japan and Korea Export Volume and Yen Real Effective Exchange Rate Relative Profit Margin Movements and Yen Real Effective Exchange Rate

4 1.7.5 Profit Margin Adjustment in Response to a 1 Percent Real Effective Exchange Rate Depreciation Short- and Long-Term Responses to a 1 Percent Real Effective Exchange Rate Depreciation across Export Sectors Japan versus Korea: Responses to a 1 Percent Real Effective Exchange Rate Depreciation Japan: Age Employment Profile for Female Labor, Selected OECD Countries: Female Labor Force Participation and Total Fertility Rates, Annual Average Damage 1.9. Asia and Pacific Small States: Occurrence of Disasters per Year Pacific Island Countries: Response to a Natural Disaster Real House Price 1.1. Real House Price and Real Consumption Growth Impact of Real House Price Shock on Real GDP Impact of Interest Rate Shock on Real House Price Spillover Plot, Equity Market Returns, and Volatility Net Asset Returns Spillover Real Interest Rates 1.1. Real Interest Rates Real Neutral Rate: Theoretical Calibration Real Neutral Rate: Semistructural Model Estimates Trend Growth Rate: Semistructural Model Estimates Real Neutral Rate: Extended Taylor Rule Estimates

5 1.1.7 Impact of Global Neutral Rate on Domestic Neutral Rate versus Financial Openness U.S. Real Neutral Rate Impact of a One Standard Deviation Increase in Policy Rate on Loan Growth Impact of a One Standard Deviation Change in Global Financial Conditions on Loan Growth Impact of a One Standard Deviation Increase in Policy Rate on Loan Growth across Different Types of Bank Ownership Foreign Bank Share of Domestic Banking Sector Assets Impact of Foreign Presence on Monetary Policy Transmission to Loan Growth Southern Oscillation Index The Effects of an El Niño Shock on Real GDP Growth Food Weight in Consumer Price Index Basket and Inflation Responses to an El Niño Shock.1 A Hypothesized Smiley-Shaped Relationship between Value Added and Global Value Chain Position. Participation in Global Value Chains: 1995 versus 1.3 Domestic Value-Added Share in Global Value Added.4 Upstreamness or Downstreamness.5 Tariffs and GVC Participation.6 Illustrative Impact: GVC Participation.7 Assessing the Link between Moving Up Global Value Chains, Upstreamness, Economic Complexity, and Tariffs.8 Research and Development Expenditure and Upstreamness

6 .9 Illustrative Impact of 1 Percent Appreciation in the Real Effective Exchange Rate on GVC-Related Trade.1 Average Exchange Rate Variability: Economic Complexity..1 The share of value captured within the electronics sector has shifted in both Korea and Japan 3.1 Asia: Foreign Direct Investment 3. Asia: Foreign Portfolio Investment and Foreign Portfolio Investment Assets 3.3 Sources of Portfolio Inward Investment 3.4 Destinations of Portfolio Outward Investment 3.5 Sources of Foreign Bank Claims on Asia 3.6 Asia: Foreign Bank Claims 3.7 Interest Rate Dispersion Comparison 3.8 Home Bias Index across Regions 3.9 Illustrative Impact of Explanatory Variables on Financial Integration 3.1 Capital Account Openness Index 3.11 Allowed Foreign Ownership of Equity in the Banking Sector 3.1 Foreign Bank Penetration 3.13 Difference in Investor Protection Index 3.14 Difference in Contract Enforcement Index 3.15 Difference in Resolving Insolvency Index 3..1 Financial Inclusion and Cross-Border Banking Integration 3.. Illustrative Impact on Financial Inclusion of Moving from 5th Percentile to 75th Percentile in Explanatory Variable 3..3 Effect of Regional Banking Integration on Financial Inclusion

7 Figure 1.1 Real GDP Growth (Year-over-year percent change) Asia European Union Commonwealth of Independent States Latin America and the Caribbean Middle East and North Africa Source: IMF, World Economic Outlook database.

8 Figure 1. Asia: Contribution to World Real GDP Growth (Purchasing power parity based; percent) China Japan Rest of Asia Others World Projection Sources: IMF, World Economic Outlook database; and IMF staff calculations.

9 Figure 1.3 Oil Price Windfall: Impact on the Oil Trade Balance in 15 (Percent of GDP) Less than 1.5 percent 1.5 percent to 3 percent Greater than 3 percent Country Oil Price Windfall Australia Vietnam Malaysia New Zealand China Indonesia Japan Philippines Singapore India Taiwan Province of China Korea Hong Kong SAR Thailand Asia (simple average) Asia (weighted average) Source: IMF staff estimates. Note: Based on 14 oil trade balance, assuming unchanged quantities and the April 15 World Economic Outlook oil price projections for 15.

10 Figure 1.4 Impact of Oil Price Decline on Macro Forecasts (Percentage points of GDP; percent growth) Commodity exporters Simple average Max 1 Weighted average 1 3 Min 4 GDP growth S-I (public) Net oil importers Simple average 3 S-I (private) Weighted average Current account balance Max 1 1 Min GDP growth S-I (public) S-I (private) Current account balance Source: IMF staff estimates. Note: S-I = saving-investment. Deviation from October 14 World Economic Outlook (WEO) as a result of the January 15 WEO update s oil price baseline.

11 Figure 1.5 Selected Asia: Inflation Decomposition of the CPI Basket Share of CPI basket within inflation bracket < 1 [ 1,) [,1) [1,) [,3) 3 Headline inflation (right scale) China Singapore Korea Thailand Vietnam New Zealand Taiwan Province of China Australia Core inflation (right scale) Malaysia Japan Philippines India Hong Kong SAR Indonesia Headline and core inflation Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations. Note: CPI = consumer price index. The inflation diffustion index, headline inflation, and core inflation are based on the latest available data.

12 Figure 1.6 Selected Asia: Exchange Rates (Percentage change since June 14; positive = national currency appreciation) Nominal effective exchange rate (gross trade based) Nominal effective exchange rate (value added trade based) Bilateral exchange rate (U.S. dollar per national currency) Multilateral exchange rate (equally weighted basket of U.S. dollar, euro, and yen, per national currency) Australia Malaysia Singapore Korea Indonesia Philippines India Vietnam Thailand China Sources: CEIC Data Co. Ltd.; Haver Analytics; Organisation for Economic Co-operation and Development and World Trade Organization, Trade in Value Added database; and IMF staff calculations.

13 Figure 1.7 Asia: Commodity Exports and Exchange Rate Movements (Percent) Exchange rate depreciation China Sri Lanka Thailand India Philippines Singapore Korea Hong Kong SAR Vietnam Solomon Islands Brunei Darussalam Indonesia Malaysia New Zealand Australia Commodity net exports/total exports (13) Sources: CEIC Data Co. Ltd.; IMF, Direction of Trade Statistics; UN Comtrade database; and IMF staff calculations. Note: Commodity sectors are classified based on Standard International Trade Classification codes, 1,, 3, 4, 68, 667, and 971. Exchange rate depreciation is based on exchange rate changes between 14:Q3 14:Q4.

14 Figure 1.8 Selected Asia: Change in Exchange Rates and Reserves (Change since end-13; percent) Change in bilateral exchange rate (U.S. dollar/national currency) Malaysia Thailand Philippines China Hong Kong SAR India Korea Taiwan province Singapore of China Indonesia Australia Japan New Zealand Change in reserves Sources: Bloomberg L.P.; CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

15 Figure 1.9 Asia: Exchange Market Pressure Index (Change in U.S. dollar/local currency exchange rate + change in reserves) :M1 Asia 3:M1 5:M1 Non-Asia (emerging market economies) 7:M1 9:M1 11:M1 Buying pressure Selling pressure 13:M1 15:M1 Source: IMF staff calculations. Note: Asia includes Australia, China, Hong Kong SAR, India, Indonesia, Japan, Korea, Malaysia, New Zealand, the Philippines, Singapore, Taiwan Province of China, Thailand, and Vietnam.

16 Figure 1.1 Selected Asia: Credit by All Providers to the Nonfinancial Private Sector (Percent of GDP) Philippines Indonesia India Vietnam 14:Q3 Thailand Taiwan Province of China Malaysia 7 Singapore New Zealand Japan Australia Korea China Hong Kong SAR Sources: Bank for International Settlements, Credit to the Private Sector database; CEIC Data Co. Ltd.; and IMF staff calculations.

17 Figure 1.11 Asia: Equity and Bond Funds Monthly Net Flows (Billions of U.S. dollars) Bond funds Equity funds Peak: 6 7 Jan-1 Apr-1 Jul-1 Oct-1 Jan-11 Apr-11 Jul-11 Oct-11 Jan-1 Apr-1 Jul-1 Oct-1 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Source: Haver Analytics. Note: Includes exchange traded fund flows and mutual fund flows for emerging Asia, Australia, Hong Kong SAR, Korea, New Zealand, Singapore, and Taiwan Province of China. Mar-15

18 Figure 1.1 Asia: Financial Account Balances (Percent of GDP) (estimate) 15 (projection) Australia, Japan, New Zealand East Asia (excluding China) 1 China India Indonesia ASEAN Sources: IMF, World Economic Outlook database; and IMF staff calculations. Note: Inflows are included with a positive sign, while outflows are included with a negative sign. Financial account balance excludes reserve assets. Financial account balances are based on definitions from the IMF s Balance of Payments Manual (IMF 9). 1 ASEAN includes Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

19 Figure 1.13 Selected Asia: Foreign Exchange Reserve Accumulation (Billions of U.S. dollars) Malaysia Reserve accumulation since end-13 Reserve accumulation since November 14 Singapore Japan Thailand Philippines Taiwan Province of China Korea Indonesia China Hong Kong SAR India Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

20 Figure 1.14 Selected Asia: Private Sector Credit Growth (Year-over-year; percent) Pre-tapering (April 13) Latest 11 average 5 Japan Korea Australia New Zealand Taiwan Province of China China India Indonesia Thailand Malaysia Singapore Philippines Hong Kong SAR Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

21 Figure 1.15 Asia: Sovereign Bond Yields (Percent per annum) Latest End-14 End-14:Q3 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y 3M 1Y 1Y JPN AUS NZL HKG KOR SGP TWN IDN MYS PHL THA CHN IND Sources: Bloomberg L.P.; and CEIC Data Co. Ltd. Note: 3M = three-month treasury bills; 1Y = one-year government bond yield; 1Y = 1-year government bond yield. When exact maturity is not available, the next closest maturity is used. Country codes are based on International Organization for Standardization classifications.

22 Figure 1.16 Selected Asia: Real Policy Rates (Percent) June 14: Inflation expectation based June 14: Core based Japan Vietnam Australia Thailand Korea Malaysia Taiwan Province of China Latest: Inflation expectation based Latest: Core based Philippines China New Zealand India Indonesia Sources: CEIC Data Co. Ltd.; Consensus Economics; Haver Analytics; and IMF staff calculations. Note: Real policy rate is based on one-year-ahead inflation forecast from Consensus Economics. For Japan, the uncollateralized overnight rate is used. For India, the three-month treasury bill rate is used as the proxy for policy rate.

23 Figure 1.17 Asia Financial Stability Heat Map Z-score at or above ; momentum increasing Z-score at or above ; momentum decreasing or no change Z-score at or above 1, but less than ; momentum increasing Z-score at or above 1, but less than ; momentum decreasing or no change Z-score at or above.5, but less than 1 Z-score at or above.5, but less than.5 Z-score at or above, but less than.5 Z-score at or above Residential real estate 1 Credit to GDP growth Equity markets 3 AUS CHN HKG IDN IND JPN KOR MYS NZL PHL SGP THA AUS CHN HKG IDN IND JPN KOR MYS NZL PHL SGP THA AUS CHN HKG IDN IND JPN KOR MYS NZL PHL SGP THA 8:Q 8:Q3 8:Q4 9:Q1 9:Q 9:Q3 9:Q4 1:Q1 1:Q 1:Q3 1:Q4 11:Q1 11:Q 11:Q3 11:Q4 1:Q1 1:Q 1:Q3 1:Q4 13:Q1 13:Q 13:Q3 13:Q4 14:Q1 14:Q 14:Q3 14:Q4... Source: IMF staff estimates. Note: Colors represent the extent of the deviation from the long-term median expressed in number of median-based standard deviations (median-based Z-scores). Medians and standard deviations are for the period starting :Q1, where data is available. Country labels use International Organization for Standardization country codes. 1 Estimated using house-price-to-rent and price-to-income ratios. Year-over-year growth of credit-to-gdp ratio. 3 Estimated using price-to-earnings and price-to-book ratios.

24 Figure 1.18 Asia: Output Gap versus Credit Gap (Percent) Credit gap Australia Philippines Japan Singapore Hong Kong SAR New Zealand China Korea Malaysia Thailand Taiwan Province of China Indonesia India Output gap Sources: CEIC Data Co. Ltd.; IMF, World Economic Outlook database; and IMF staff calculations. Note: Credit-to-GDP data are as of 14:Q4. Credit gap is calculated as a percent deviation from the trend credit-to-gdp (approximated using the Hodrick Prescott filter over the period 14). The output gap is based on country estimates for 15.

25 Figure 1.19 Asia: Nonfinancial Corporate Sector Potential Vulnerabilities, 14 Asia Advanced Asia Emerging Asia Foreign currency debt issuance (% total issuance) Maturing debt in 15 (% total outstanding debt) Non-investment grade debt issuance (% total issuance) Foreign currency debt maturities in 15 (% total maturing debt) Source: Dealogic. Note: Based on data related to issuance and maturing debt (i.e., bonds and syndicated loans). Data compiled on residency basis.

26 Figure 1. Selected Asia: Debt-to-Equity Ratio for All Firms (both listed and unlisted firms) (Debt-weighted average) Asia Australia Hong Kong SAR Indonesia New Zealand Singapore Taiwan Province of China Vietnam India Philippines Thailand Malaysia Korea China Japan Sources: Bureau van Dijk, Orbis database; and IMF staff calculations.

27 Figure 1.1 Stock of Outstanding Bonds and Syndicated Loans in Foreign Currency End-14 (Percent of GDP) Resident Nonresident national Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Hong Kong Korea Singapore Taiwan Indonesia Malaysia Philippines Thailand Vietnam China India SAR Province of China Sources: Dealogic; and IMF staff calculations. Note: Residency basis measures borrowing by firms in the country of registration; nationality basis includes also offshore borrowing by nonresident affiliates of resident firms.

28 Figure 1. Stock of Outstanding Bonds and Syndicated Loans in Foreign Currency End-14 (Percent of reserves) Resident Nonresident national Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Total Nonfinancial Hong Kong Korea Singapore Taiwan Indonesia Malaysia Philippines Thailand Vietnam China India SAR Province of China Sources: Dealogic; and IMF staff calculations. Note: Residency basis measures borrowing by firms in the country of registration; nationality basis includes offshore borrowing by nonresident affiliates of resident firms.

29 Figure 1.3 Selected Asia: Tier 1 Capital Ratio Latest (Percent) India China Australia Korea New Zealand Japan Vietnam Thailand Singapore Philippines Hong Kong SAR Malaysia Indonesia Sources: Country authorities; and IMF, Financial Soundness Indicators. Note: As of 14:Q3 or latest available: Australia: 14:Q; China: 13; Hong Kong SAR: 14:Q3; India: 14:Q3; Indonesia: 14:Q; Japan: 14:Q1; Korea: 13:Q4; Malaysia: 14:Q3; Philippines: 14:Q3; Singapore: 14:Q3; Vietnam: 1; Thailand: 14:Q3; New Zealand: 14:Q.

30 Figure 1.4 China: Potential Growth Decomposition (Percentage points) 1 Total factor productivity Capital Labor Source: IMF staff calculations.

31 Figure 1.5 China: Growth Slowing Down (Percentage points unless otherwise specified) Consumption Net exports Real estate investment (year-over-year, percent, right scale) Investment Total social financing stock (year-over-year, percent, right scale) Sources: CEIC Data Co. Ltd.; and IMF staff calculations.

32 Figure 1.6 China: Social Financing Stock (Percent) In percent of GDP Total social financing stock: bank loans (left scale) Total social financing stock: other (left scale) Total social financing growth (right scale) Year-over-year growth Source: Haver Analytics.

33 Figure 1.7 Asia: Stock Markets (Change of stock market index; percent) Change in 14 Year-to-date change Malaysia Korea Australia Hong Kong SAR Singapore Japan Taiwan Province of China Vietnam Thailand New Zealand Indonesia Philippines India China Sources: Bloomberg, L.P.; and IMF staff calculations.

34 Figure 1.8 Japan: Real GDP Growth and Inflation (Year-over-year percent change) 6 Real GDP growth Inflation Source: IMF, World Economic Outlook database.

35 Figure 1.9 India: Current Account, Fiscal Balance, and Inflation Percent of GDP General government balance (left scale) Current account balance (left scale) Inflation (right scale) Year-over-year percent change Sources: Haver Analytics; India Ministry of Finance; and Reserve Bank of India.

36 Figure 1.3 Asia: Changes in Real GDP at Market Prices (Percent) :Q1 13:Q 13:Q3 13:Q4 14:Q1 14:Q 14:Q3 14:Q4 Quarter-over-quarter (SAAR) 13:Q1 13:Q 13:Q3 13:Q4 14:Q1 14:Q 14:Q3 14:Q4 13:Q1 13:Q 13:Q3 13:Q4 14:Q1 14:Q 14:Q3 14:Q4 Year-over-year 13:Q1 13:Q 13:Q3 13:Q4 14:Q1 14:Q 14:Q3 14:Q4 13:Q1 13:Q 13:Q3 13:Q4 14:Q1 14:Q 14:Q3 14:Q4 Australia, Japan, and New East Asia Zealand (excluding China) 1 China India ASEAN Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations. Note: SAAR = seasonally adjusted annualized rate. 1 ASEAN includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

37 Figure 1.31 Selected Asia: Exports to Major Destinations (Three-month percent change of three-month moving average; SAAR) To the United States To euro area To Japan To China Jan-11 May-11 Sep-11 Jan-1 May-1 Sep-1 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 Jan-11 May-11 Sep-11 Jan-1 May-1 Sep-1 Jan-13 May-13 Sep-13 Jan-14 May-14 Sep-14 Jan-15 Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations. Note: SAAR = seasonally adjusted annualized rate. Selected Asia includes China, Hong Kong SAR, Japan, Korea, Malaysia, Taiwan Province of China, Thailand, the Philippines, and Singapore, and East Asia. Indonesia and Vietnam are excluded owing to data lags.

38 Figure 1.3 Selected Asia: Contributions to Projected Growth (Year-over-year; percentage points) Net exports Investment Consumption Growth Asia Australia, China East Asia India Japan, and ASEAN 1 (excluding New Zealand China) Sources: IMF, World Economic Outlook database; and IMF staff calculations. Note: The difference between the GDP growth and the sum of components is due to the statistical discrepancy. 1 ASEAN includes Indonesia, Malaysia, the Philippines, Singapore, Thailand, and Vietnam.

39 Figure 1.33 Asia: Contributions to Change in Headline Inflation in 14 (Percentage points; end-of-period) Contribution from food Contribution from other prices Contribution from fuel Change in headline inflation rate India Vietnam Singapore Philippines Thailand Australia China New Zealand Malaysia Korea Taiwan Province of China Indonesia Hong Kong SAR Japan Sources: CEIC Data Co., Ltd.; Haver Analytics; and IMF staff calculations.

40 Figure 1.34 Selected Asia: Real GDP Growth and Output Gap (Percent) Growth: 14 Growth: 15 Growth: 16 Output gap: 15 (right scale) Real GDP growth (year-over-year percent change) Positive or neutral output gap New Zealand Singapore Malaysia Philippines Negative output gap with increasing growth Indonesia Australia Hong Kong SAR India Taiwan Province of China Thailand Japan Korea Negative output gap with declining growth China Vietnam Output gap (in percent of potential GDP) Sources: IMF, World Economic Outlook database; and IMF staff estimates.

41 Figure 1.35 Asia: Headline Inflation (Year-over-year change; percent) Singapore Thailand End-13 End (projection) Taiwan Province of China New Zealand Korea China Australia Vietnam Japan Malaysia Philippines India Hong Kong SAR Indonesia Sources: CEIC Data Co. Ltd.; Haver Analytics; IMF, World Economic Outlook database; and IMF staff calculations. Note: India s 15 projection is on a fiscal-year basis.

42 Figure 1.36 Selected Asia: Policy Rate Actions (Basis points) Cumulative policy actions since January 14 Cumulative policy actions since June 14 Change from previous month Cutters Holders Raisers Korea India Thailand China Vietnam Australia Japan Indonesia Taiwan Province of China Hong Kong SAR Malaysia Philippines New Zealand Sources: Haver Analytics; and IMF staff calculations. Note: For Japan, the uncollateralized overnight rate is used; ordered by cumulative policy actions since January 14.

43 Figure 1.37 Asia: Estimated Central Bank Reaction Functions (Percent) Nominal policy rate (latest) Rate implied by the reaction function with ρ 1 Rate implied by the reaction function without ρ Korea Thailand Australia China Malaysia New Zealand Philippines Indonesia India Sources: Haver Analytics; and IMF staff estimates. Note: Estimated as of April, 15, with monthly data. 1 Estimated as i t = ρ*i t 1 +(1 ρ)*(α + γ 1 E t [π t + 1 π*] + γ E t Output Gap t δ 1 REER t + δ US_3Myield t )+ε t. Estimated as i t = α + γ 1 E t [π t + 1 π*] + γ E t Output Gap t δ 1 REER t + δ US_3Myield t + ε t.

44 Figure 1.38 Selected Asia: Cyclically Adjusted Fiscal Balance (Percent of GDP) Japan Average: 7 India Vietnam Malaysia Australia Taiwan Province of China Indonesia Thailand China New Zealand Philippines Korea Hong Kong SAR Singapore Sources: IMF, World Economic Outlook database; and IMF staff calculations.

45 Figure 1.39 Asia: Real GDP Growth (Central forecast and selected confidence intervals; percent) percent confidence interval 7 percent confidence interval 9 percent confidence interval Central forecast Sources: IMF, World Economic Outlook database; and IMF staff estimates.

46 Figure Selected Asia: Export Growth Rates.5 Precrisis (1998 8) Asia ASEAN-5 1 Emerging Asia Japan China World Sources: UNCTADstat; and IMF staff calculations. 1 ASEAN-5 comprises Indonesia, Malaysia, the Philippines, Singapore, and Thailand.

47 Figure 1.1. Deviation of Trading Partner s Demand in 14 from the Trend World Japan China Korea Sources: IMF, Global Economic Environment database; and IMF staff calculations. Thailand

48 Figure Japan: Trading Partners Demand (5 = 1) Import-intensity adjusted demand Aggregate demand :Q1 95:Q1 99:Q1 3:Q1 7:Q1 11:Q1 14:Q3 Sources: Bussière and others (13); Haver Analytics; and IMF staff calculations.

49 Figure Long-Term Export Income Elasticity Taiwan Province of China Hong Kong SAR Singapore Thailand Philippines Korea United States Japan Australia India China Sources: IMF, Information Notice System; IMF, Global Economic Environment database; UNCTADstat; and IMF staff calculations.

50 Figure 1..1 World: Headline Consumer Price Index Inflation (Percent, year over year) Jan-1 Jul-1 Advanced economies Emerging markets Jan-11 Jul-11 Jan-1 Jul-1 Jan-13 Emerging Asia Jul-13 Jan-14 Jul-14 Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

51 Figure 1.. Three Latent Common Factors (Percent, year-over-year) :Q1 :Q3 4:Q1 Standardized common factor 1 Standardized common factor Standardized common factor 3 5:Q3 7:Q1 8:Q3 1:Q1 11:Q3 13:Q1 Sources: IMF, World Economic Outlook database; and IMF staff calculations.

52 Figure 1..3 Factor 1 and Commodity Prices (Percent, year-over-year) :Q1 :Q3 Commodity price, all commodities Nonfuel 4:Q1 5:Q3 7:Q1 8:Q3 Fuel (energy) Common factor 1:Q1 11:Q3 13:Q1 Sources: IMF, World Economic Outlook database; and IMF staff calculations. Note: All commodity price index, 5 = 1, includes fuel and nonfuel prices indices; nonfuel price index, 5 = 1, includes food and beverages and industrial inputs price index; fuel (energy), 5 = 1, includes crude oil (petroleum), natural gas, and coal price indices.

53 Figure 1..4 Factor : Great Inflation Moderation (Percent, year-over-year) Mar-1 Sep-1 Mar- Sep- Mar-3 Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Sources: IMF, World Economic Outlook database; and IM staff calculations.

54 Figure 1..5 Factor 3 and U.S. Nominal Effective Exchange Rate (NEER) (Percent, year over year) :Q1 U.S. NEER, all countries Common factor 3 :Q3 4:Q1 5:Q3 7:Q1 8:Q3 1:Q1 11:Q3 13:Q1 Sources: IMF, World Economic Outlook database; and IMF staff calculations.

55 Figure 1..6 Loading Coefficients of Factors 1,, and 3 in Asia Loading coefficients of factor 1 Australia China Hong Kong SAR India Indonesia Japan Korea Malaysia New Zealand Philippines Singapore Taiwan Province of China Thailand Vietnam Source: IMF staff estimates Loading coefficients of factor Australia China Hong Kong SAR India Indonesia Japan Korea Malaysia New Zealand Philippines Singapore Taiwan Province of China Thailand Vietnam Loading coefficients of factor 3 Australia China Hong Kong SAR India Indonesia Japan Korea Malaysia New Zealand Philippines Singapore Taiwan Province of China Thailand Vietnam

56 Figure 1..7 Variability of Inflation Explained by the Common Factors (Percent) Indonesia New Zealand Korea Australia Philippines Japan Malaysia China Taiwan Province of China Thailand India Singapore Hong Kong SAR Vietnam Sources: IMF, World Economic Outlook database; and IMF staff calculations.

57 Figure 1..8 Asia: Actual and Common-Origin Inflation (Percent) Advanced Asia 1 Emerging Asia Demeaned inflation Common-origin inflation 1 Demeaned inflation Common-origin inflation Mar-1 Sep-1 Mar- Sep- Mar-3 Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-14 Sep-14 Mar-1 Sep-1 Mar- Sep- Mar-3 Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-14 Sep-14 Source: IMF staff estimates. 1 The sample includes Australia, Hong Kong SAR, Japan, Korea, New Zealand, Singapore, and Taiwan Province of China. The sample includes China, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

58 Figure 1..9 Asia: Actual and Common-Origin Inflation (Percent) Advanced Asia 1 Emerging Asia Demeaned inflation Common-origin inflation Demeaned inflation Common-origin inflation Mar-1 Sep-1 Mar- Sep- Mar-3 Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Mar-1 Sep-1 Mar- Sep- Mar-3 Sep-3 Mar-4 Sep-4 Mar-5 Sep-5 Mar-6 Sep-6 Mar-7 Sep-7 Mar-8 Sep-8 Mar-9 Sep-9 Mar-1 Sep-1 Mar-11 Sep-11 Mar-1 Sep-1 Mar-13 Sep-13 Mar-14 Sep-14 Mar-15 Sep-15 Mar-16 Sep-16 Source: IMF staff estimates. 1 The sample includes Australia, Hong Kong SAR, Japan, Korea, New Zealand, Singapore, and Taiwan Province of China. The sample includes China, India, Indonesia, Malaysia, Philippines, Thailand, and Vietnam.

59 Figure Credit Intensity of GDP: Pre and Post Global Financial Crisis (Percent for credit to GDP; simple ratio for credit intensity of GDP) Indonesia Credit to GDP (7; left scale) Pre global financial crisis debt to equity (4 7) Post global financial crisis debt to equity (1 13) Philippines India Vietnam Thailand China Singapore Taiwan Province of China Malaysia Sources: Bank for International Settlements, Credit to the Private Sector and Locational Banking Statistics; Dealogic; IMF, International Financial Statistics; IMF, World Economic Outlook database; and IMF staff calculations. Note: Eurozone countries include Austria, Belgium, France, Germany, Italy, the Netherlands, and Luxembourg. EMs (non-asia) = emerging market economies outside Asia, including Brazil, Mexico, Russia, Turkey, and South Africa. * denotes countries and country groups (only Mexico for non-asian EMs) for which comprehensive Bank for International Settlements data on total private credit are available. New Zealand Korea * Hong Kong SAR Australia * EMs (non-asia) * Canada United States * United Kingdom * Euro area *

60 Figure 1.3. Debt-to-Equity Ratio: Pre and Post Global Financial Crisis (Precrisis and postcrisis average of market cap-weighted means, percent) Change in credit intensity pre- and postcrisis (left scale) Pre global financial crisis debt to equity (4 7) Post global financial crisis debt to equity (1 13) 16 New Zealand Australia Vietnam India Korea Indonesia Philippines China Taiwan Province of China Malaysia Thailand Singapore Hong Kong SAR Sources: IMF, Corporate Vulnerability Utility; and IMF staff calculations

61 Figure Cash-to-Debt Ratio: Pre and Post Global Financial Crisis (In simple ratios) Change in credit intensity pre- and postcrisis (left scale) Pre global financial crisis cash-to-debt ratio (4 7) Post global financial crisis cash-to-debt ratio (1 13) New Zealand Australia Vietnam India Korea Indonesia Philippines China Taiwan Province of China Malaysia Thailand Singapore Hong Kong SAR Sources: Bank for International Settlements; Haver Analytics; IMF, International Financial Statistics; IMF, World Economic Outlook database; Orbis; and IMF staff calculations. Note: The cash-to-debt ratio is the average of the median for each country and year.

62 Figure Selected Asia: Financial Conditions Indexes Japan Simple average Vector autoregressive models Dynamic factor models Australia New Zealand Hong Kong SAR Singapore Taiwan Province of China Korea Malaysia Philippines Thailand Indonesia China India Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Jan- Sep- May-1 Jan- Sep- May-3 Jan-4 Sep-4 May-5 Jan-6 Sep-6 May-7 Jan-8 Sep-8 May-9 Jan-1 Sep-1 May-11 Jan-1 Sep-1 May-13 Jan-14 Sep-14 Source: IMF staff estimates.

63 Figure Responses of Key Variables to Global Financial Market Volatility Shocks 1. Growth (percentage points). Inflation (basis points) Australia China India Indonesia Japan Korea Malaysia New Zealand Philippines Singapore Thailand Australia China India Indonesia Japan Korea Malaysia New Zealand Philippines Singapore Thailand Advanced economies Rest of emerging economies Commodity exporters Real exchange rate (percent), + = depreciation Advanced economies Rest of emerging economies Commodity exporters Equity prices (percent) Australia Australia China India India Japan Indonesia Korea Japan Korea Malaysia Malaysia New Zealand New Zealand Philippines Philippines Singapore Singapore Thailand Thailand Advanced economies Advanced economies Rest of emerging economies Rest of emerging economies Commodity exporters Commodity exporters Term premium (basis points) 6. Oil price Australia India Japan Korea New Zealand Advanced economies Rest of emerging economies Source: Authors estimates. Note: Depicts change in macroeconomic/financial variables of a given country/region after one year associated with one positive shock to the financial stress index, implying an increase in global financial market volatility. Impulse responses for oil price (with 9 percent bootstrapped confidence intervals) are reported over a period of 4 quarters (vertical numbers should be multiplied by 1). The U.S. dollar is the numeraire..6.8

64 Figure Residential Real Estate: Market Conditions (December 6 = 1; seasonally adjusted; three-month moving average) Investment growth (percent, year-over-year, right scale) Floor space sold Price Dec-6 Dec-7 Dec-8 Dec-9 Dec-1 Dec-11 Dec-1 Dec-13 Dec-14 Sources: National Bureau of Statistics; and IMF staff calculations. 1 National Bureau of Statistics 7-city newly constructed residential property average price.

65 Figure 1.6. Residential Real Estate: Inventory Ratio (Months; three-month moving average) Local housing administrative bureau data (left scale) National Bureau of Statistics data (right scale) Residential Real Estate: Inventory Ratio by Tier (Years) Tier 1 Tier Tier 3 or 4 All Sources: Local Housing Administrative Bureau (Fangguanju); National Bureau of Statistics; and IMF staff calculations. Note: The inventory ratio is measured as floor space unsold to sold.

66 Figure Residential Real Estate: Baseline Adjustment Scenario (Millions of square meters) Excess supply 1 Floor space sold (two-year lead) Floor space started 1,6 1,4 1, 1, Baseline Adjustment Scenario: Growth Rate (Percent; year over year) Floor space sold (two-year lead) Floor space started Residential Real Estate: Stronger Demand Adjustment Scenario (Millions of square meters) Excess supply (demand pickup) 1 Floor space sold (baseline, two-year lead) Floor space sold (demand pickup, two-year lead) Floor space started (baseline adjustment) Floor space started (demand pickup), 1,8 1,6 1,4 1, 1, Sources: National Bureau of Statistics; and IMF staff estimates and projections. 1 Excess supply is measured as the difference between floor space started and sold (two-year lead).

67 Figure Residential Real Estate: Investment and Housing Starts (Percent; year over year) Real estate gross fixed capital formation Floor space started Sources: National Bureau of Statistics; and IMF staff calculations.

68 Figure Yen Effective Exchange Rates Movement (Index; 1 = 1) Yen nominal effective exchange rate Yen real effective exchange rate 198:Q1 81:Q3 83:Q1 84:Q3 86:Q1 87:Q3 89:Q1 9:Q3 9:Q1 93:Q3 95:Q1 96:Q3 98:Q1 99:Q3 1:Q1 :Q3 4:Q1 5:Q3 7:Q1 8:Q3 1:Q1 11:Q3 13:Q1 14:Q3 Sources: CEIC Data Co. Ltd.; and IMF staff calculations.

69 Figure 1.7. Developments in Yen/Won Cross Exchange Rate and Won Real Effective Exchange Rate (Index; 1 = 1) Yen/Won cross exchange rate Won real effective exchange rate (right scale) :M1 1:M4 1:M7 1:M1 13:M1 13:M4 13:M7 13:M1 14:M1 14:M4 Sources: CEIC Data Co. Ltd.; and IMF staff calculations.

70 Figure Japan and Korea Export Volume and Yen Real Effective Exchange Rate (Index; 1 = 1) Yen real effective exchange rate Korea export volume (right scale) :Q3 1:Q3 11:Q3 1:Q3 13:Q3 Sources: CEIC Data Co. Ltd.; and IMF staff calculations. Japan export volume (right scale) 14:Q

71 Figure Relative Profit Margin Movements and Yen Real Effective Exchange Rate (Index) 1 = :M1 1:M1 Yen real effective exchange rate Korea profit margin (right scale) Japan profit margin (right scale) 11:M1 Sources: CEIC Data Co. Ltd.; and IMF staff calculations. Note: Profit margin is defined as local-currency-denominated export price minus domestic price. 1:M1 13:M1 14:M1 15:M

72 Figure Profit Margin Adjustment in Response to a 1 Percent Real Effective Exchange Rate Depreciation (Percent) 1. Transportation. Metal Initial adjustment Korea Korea 4 Japan 6 4 Japan 8 6 Korea 1 8 Korea 1 Japan 1 Japan 1 Long-term profit margin Initial adjustment Long-term profit margin Initial adjustment Long-term profit margin Initial adjustment Long-term profit margin 4. Textile 3. Electronics Sources: CEIC Data Co. Ltd.; and IMF staff estimates. Korea Korea Long-term profit margin Japan Initial adjustment Japan Long-term profit margin Korea Initial adjustment Korea Japan Japan Initial adjustment Long-term profit margin Initial adjustment Long-term profit margin

73 Figure Short- and Long-Term Responses to a 1 Percent Real Effective Exchange Rate Depreciation across Export Sectors (Percent) 1. Short-term response. Long-term response Sources: CEIC Data Co. Ltd.; and IMF staff estimates. Transportation 4 Korea Textile 6 4 Transportation 8 6 Textile 1 8 Electronics 1 Metal 1 Electronics Japan Korea Metal Japan 1

74 Figure Japan versus Korea: Responses to a 1 Percent Real Effective Exchange Rate Depreciation (Percent). Korea 4 Transportation 6 4 Textile 8 6 Electronics 1 8 Metal 1 Short term Sources: CEIC Data Co. Ltd.; and IMF staff estimates. Long term Transportation 1 Textile Long term Electronics 1 Short term Metal 1. Japan

75 Figure Japan: Age Employment Profile for Female Labor, 1 (Percent) Source: Kinoshita and Guo (15). Men Women Age

76 Figure 1.8. Selected OECD Countries: Female Labor Force Participation and Total Fertility Rates, Total fertility rate (number of children per woman) y =.11x +.97 Netherlands R =.785 Australia United States Belgium Ireland France United Kingdom Luxembourg Sweden Norway Average Japan Denmark Italy Canada Spain Germany Finland Greece Korea Portugal Female labor force participation rate (percent) Source: Organisation for Economic Co-operation and Development (OECD) Labor Force Survey.

77 Figure Annual Average Damage (Percent) Pacific small states Small states (excluding PICs) Nonsmall states mean:.3 PIC small states mean:.6 Small states (excl. PICs) mean: 1.4 St. Lucia Vanuatu St. Kitts and Nevis Tonga Dominica Grenada Solomon Islands Micronesia Fiji Antigua and Barbuda Marshall Islands Belize Samoa Palau Mauritius Maldives Guyana Bahamas St. Vincent and the Grenadines Timor-Leste Tuvalu Comoros Kiribati Barbados Swaziland Seychelles Cape Verde Djibouti Trinidad and Tobago Sources: Center for Research on Epidemiology of Disasters, International Disaster Database; Pacific Catastrophic Risk Asessment and Financing Initiative; and IMF staff estimates. Note: Based on the period PICs = Pacific island countries.

78 Figure 1.9. Asia and Pacific Small States: Occurrence of Disasters per Year (Average number of disasters per year) Fiji Vanuatu Solomon Islands Tonga Samoa Timor-Leste Sources: Center for Research on Epidemiology for Disasters, International Disaster database; and IMF staff estimates. Bhutan Small states excluding Asia and Pacific Micronesia Tuvalu Maldives Asia and Pacific small states Kiribati Marshall Islands Palau

79 Figure Pacific Island Countries: Response to a Natural Disaster 1. Response of Real GDP Growth to Natural Disasters (Percentage points) Real GDP growth Mean response 95 percent confidence interval Time (years) Time (years) Source: IMF staff estimates. Note: Response to a natural disaster with intensity equivalent to fatalities occurring among 1 percent of the population. Change in fiscal balance. Response of Fiscal Balance to Natural Disasters (Percentage points of GDP)

80 Figure Real House Price (Percentage) Change from :Q1 to 7:Q1 Change from 9:Q1 to 14:Q Thailand Taiwan Province of China Singapore Philippines New Zealand Malaysia Korea Japan Indonesia India Hong Kong SAR China Australia Sources: CEIC Data Co. Ltd; Haver Analytics; and IMF staff calculations.

81 Figure 1.1. Real House Price and Real Consumption Growth (Percent; change from 9:Q1 to 14:Q) Consumption China Malaysia Indonesia Philippines India Hong Kong SAR Singapore Korea Taiwan Province of China Thailand Australia New Zealand Japan Real house price Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

82 Figure Impact of Real House Price Shock on Real GDP (Percent; one standard deviation shock in real housing price = 3.3 percent) Four quarters Eight quarters Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

83 Figure Impact of Interest Rate Shock on Real House Price (Percent; one standard deviation shock in interest rate = 165 basis points) Four quarters Eight quarters Sources: CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

84 Figure Spillover Plot, Equity Market Returns, and Volatility Equity returns spillover 4 7 Sources: Haver Analytics; and IMF staff calculations. Equity volatility spillover

85 Figure Net Asset Returns Spillover Japan China Korea Sources: Haver Analytics; and IMF staff calculations.

86 Figure Real Interest Rates Australia New Zealand Korea :Q1 :Q4 1:Q3 :Q 3:Q1 3:Q4 4:Q3 5:Q 6:Q1 6:Q4 7:Q3 8:Q 9:Q1 9:Q4 1:Q3 11:Q 1:Q1 1:Q4 13:Q3 14:Q Sources: Bloomberg, L.P.; CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

87 Figure 1.1. Real Interest Rates Malaysia The Philippines Thailand Indonesia India :Q1 :Q4 1:Q3 :Q 3:Q1 3:Q4 4:Q3 5:Q 6:Q1 6:Q4 7:Q3 8:Q 9:Q1 9:Q4 1:Q3 11:Q 1:Q1 1:Q4 13:Q3 14:Q Sources: Bloomberg, L.P.; CEIC Data Co. Ltd.; Haver Analytics; and IMF staff calculations.

88 Figure Real Neutral Rate: Theoretical Calibration Pre global financial crisis average Post global financial crisis average THA KOR MYS PHL NZL AUS IDN IND CHN Source: IMF staff estimates. Note: AUS = Australia; CHN = China; IDN = Indonesia; IND = India; KOR = Korea; MYS = Malaysia; NZL = New Zealand; PHL = the Philippines; THA = Thailand. The pre global financial crisis average refers to 1 8. The post global financial crisis period refers to 9 14.

89 Figure Real Neutral Rate: Semistructural Model Estimates Pre global financial crisis average Post global financial crisis average THA KOR PHL MYS NZL AUS IDN IND CHN Source: IMF staff estimates. Note: AUS = Australia; CHN = China; IDN = Indonesia; IND = India; KOR = Korea; MYS = Malaysia; NZL = New Zealand; PHL = the Philippines; THA = Thailand. The pre global financial crisis average refers to 1:Q1 8:Q3. The post global financial crisis period refers to 8:Q4 14:Q4.

90 Figure Trend Growth Rate: Semistructural Model Estimates Pre global financial crisis average Post global financial crisis NZL AUS THA KOR MYS PHL IDN IND CHN Source: IMF staff estimates. Note: AUS = Australia; CHN = China; IDN = Indonesia; IND = India; KOR = Korea; MYS = Malaysia; NZL = New Zealand; PHL = the Philippines; THA = Thailand. The pre global financial crisis average refers to 1:Q1 8:Q3. The post global financial crisis period refers to 8:Q4 14:Q4.

91 Figure Real Neutral Rate: Extended Taylor Rule Estimates Pre global financial crisis Post global financial crisis THA PHL MYS KOR IDN CHN IND AUS NZL Source: IMF staff estimates. Note: AUS = Australia; CHN = China; IDN = Indonesia; IND = India; KOR = Korea; MYS = Malaysia; NZL = New Zealand; PHL = the Philippines; THA = Thailand. The pre global financial crisis average refers to 1:Q1 8:Q3. The post global financial crisis period refers to 8:Q4 14:Q4.

92 Figure Impact of Global Neutral Rate on Domestic Neutral Rate versus Financial Openness. AUS 1.8 NZL KOR 1. PHL 1..8 CHN IDN.6 THA.4. IND MYS Financial openness Source: IMF staff estimates. Note: AUS = Australia; CHN = China; IDN = Indonesia; IND = India; KOR = Korea; MYS = Malaysia; NZL = New Zealand; PHL = the Philippines; THA = Thailand. Financial openness measured as the absolute size of foreign assets and liabilities (portfolio and other investments) to GDP, 13 average. Impact of global neutral rates

93 Figure U.S. Real Neutral Rate (Percent) Smoothed (two-sided) estimates Filtered (one-sided) estimates :Q1 :Q3 1:Q1 1:Q3 :Q1 :Q3 3:Q1 3:Q3 4:Q1 4:Q3 5:Q1 5:Q3 6:Q1 6:Q3 7:Q1 7:Q3 8:Q1 8:Q3 9:Q1 9:Q3 1:Q1 1:Q3 11:Q1 11:Q3 1:Q1 1:Q3 13:Q1 13:Q3 14:Q1 14:Q3 Source: Updated estimates of Laubach and Williams (3).

94 Figure Impact of a One Standard Deviation Increase in Policy Rate on Loan Growth (Percentage points) Commercial banks Non-commercial-bank financial institutions 1 Full sample Highly constrained (high LDR and low liquidity) Least constrained (low LDR and high liquidity) Source: IMF staff estimates. Note: LDR = Loan-to-deposit ratio. The results are based on fixed-effects panel regressions of banks (or non-commercial-bank financial institutions ) real credit growth on changes in the real policy rate, controlling for global liquidity, domestic demand, bank characteristics, and bank and time fixed effects. One standard deviation =.6 percentage points change of policy rate (cumulative change over one year). 1 Non-commercial-bank financial institutions include savings banks, cooperative banks, real estate and mortgage banks, investment banks, other nonbank credit institutions, specialized governmental credit institutions, and microfinancing institutions.