Can East Asia be an Engine of Growth for the World Economy?

The U.S. functioned as an engine of growth until the financial crisis. Now, U.S. imports have plummeted. This paper considers whether East Asia can be an engine of growth. Using data on consumption imports from 27 countries, the results indicate that income increases in East Asian countries would cause large increases in imports. The evidence also implies that an RMB appreciation would raise China’s imports. Thus if domestic markets rather than exports could drive job creation in Asia, not only would Asian consumers enjoy the fruits of their labor but the world economy would have a new locomotive to pull it out of recession.