Implications of financial crisis for East Asian trend growth

The article sets the Asian financial crisis in the context of the developmental state model of Asian development and sees it as, in part, the downside risk of a financial liberalization that was badly handled but nevertheless appropriate as a stimulus to better productivity performance. The East Asian economies are shown still to have a large labour productivity gap with the leading OECD countries and substantial scope for further rapid catch-up growth. Historical experience suggests that the policy response to the crisis is fundamental not only to immediate recovery prospects but also to realizing this remaining fast growth potential.