Short-term Policy Responses to the International Financial Crisis and Risks to sustainable Medium-term Policy Frameworks in Asia: Complications arising from Enduring Global Imbalances

June 2009

The policy measures taken to date in the Asia-Pacific region are helping to cushion the blow of the global recession. Monetary and fiscal policy stimulus has been strong and there has been considerable attention given to strengthening the financial system. Questions, however, remain about how well the short-term responses fit into a broader medium-term framework for sound monetary policy, fiscal policy and institutional reforms. I will argue that actions to date have been very important for short-term stabilisation but may exacerbate key medium-term risks associated with enduring global imbalances. The analysis also raises some questions about the benefits of emphasising export-led growth strategies in the region in the future.