This paper describes the economic implications of the SARS outbreak that hit many Asian economies in spring 2003. Without a workable diagnostic test and a treatment for the illness, surveillance and quarantine were the key weapons against SARS last year. In general, risks are greater in countries with poor public health care, poor sanitation systems, high mobility, or high population density. During the height of the SARS outbreak, we estimated that the total costs of the epidemic would be about 1.5 percent of GDP for China. Better-than-expected containment of the virus reduced the impact to only about 0.5 percent of GDP. The experiences of the SARS outbreak point to the strong need to improve both the public health system and the governance structure in Asia. Copyright (c) 2004 Center for International Development and the Massachusetts Institute of Technology.
Indonesian Experience with Financial Sector Reform Since the early 1980s Indonesia has been engaged in serious efforts to reform the financial system, and thereby stimulate sounder economic growth. This paper discusses the nature of the specific reforms carried out in Indonesia, the environment in which they were undertaken and, most importantly, their effects on the real economy. It finds that a fairly standard, phased series of reforms led to large, sustained increases in financial savings, increases in real savings, new financial products and more cost effective banks. Credit allocation suffered, however, as state banks and new entrants made loans that became nonperforming. The unusual feature of the reforms, opening the capital account before the financial sector, did not have adverse effects. Rather, the open capital account aided macroeconomic management by providing quick feedback when domestic policies moved out of line and by limiting the inflationary consequences of excessive demand stimulus. Indonesia's experience highlights the need for macroeconomic management that recognizes the limitations imposed by fiscal and external constraints and responds quickly to those constraints. ' This total does not include Fx time deposits. Source: Bank Indonesia and author's calculations. were still longer than those of demand deposits. For all banks, 24-month deposits shrank to only 10.5 per cent in 1988, as compared to 45.7 per cent in 1982. The deregulation of savings deposits has led
We assess the quantitative effects of the 1997-98 banking crisis in Asia at both the macroeconomic and bank levels, comparing our findings to broader studies of banking crises. Asia's crisis was both more severe and more costly than others but showed little evidence of prolonged bank runs. We assess the nature of reforms using measures designed to address externalities or market structure, information asymmetries, and legal infrastructure. We compare these measures to results from Barth, Caprio, and Levine (2000) with respect to the effects of banking structure and regulation on financial development, finding that reforms to date have underemphasized private monitoring and have concentrated too many assets in state-owned institutions. Despite extensive efforts at broadening legal infrastructure, progress has been poor, especially in Indonesia and Thailand. Copyright (c) 2002 Center for International Development and the Massachusetts Institute of Technology.
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