DP2112 Competition, Complementarity and Contagion in East Asia

Author(s): Ishac Diwan , Bernard Hoekman

Publication Date: March 1999

Keyword(s): Contagion , East Asia , Financial Crisis , Interdependence , Regional Economic Integration

JEL(s): F14 , F15 , F42

Programme Areas: International Macroeconomics , International Trade and Regional Economics

Link to this Page: www.cepr.org/pubs/dps/DP2112.asp

This paper explores to what extent the magnitude and speed of the contagion effects that materialized in East Asia in the second half of 1997 may have had "real" underpinnings, in the sense that the pattern of production, consumption and trade increased the vulnerability of East Asian countries to external shocks. Two major possibilities are investigated using available disaggregated data on intra- and extra-regional trade and direct investment: that Asian economies compete extensively with each other on world markets; or, to the contrary that Asia is best regarded as an integrated economy with countries specializing in complementary production. The data provide greater support for the latter hypothesis.