This paper assesses how pro-poor and inclusive Asia's recent growth has been, and what factors have been driving these outcomes. It finds that while poverty has fallen across the region over the last two decades, inequality has increased, dampening the impact of growth on poverty reduction. As a result, relative to other emerging and developing regions and to Asia's own past, the recent period of growth has been both less inclusive and less pro-poor. Our analysis suggests a number of policies that could help redress these trends and broaden the benefits of growth in Asia. These include fiscal policies to increase spending on health, education, and social safetynets; labor market reforms to boost the labor share of total income; and reforms to make financial systems more inclusive.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Evidence that cash flow has a significant effect on company investment spending, after controlling for Tobin's average Q, has often been interpreted as suggesting the importance of financing constraints. Recent work on measurement error in the Q model casts doubt on this interpretation. It is possible that the Q model may not be identified if there are 'bubbles' in stock market valuations that are both persistent over time and that are correlated with fundamental values. Cash flow may then provide additional information about expected profitability that is not captured by a poorly measured Tobin's average Q variable. We explore this hypothesis empirically using UK panel data on companies for which analysts' earnings forecasts are available from the IBES database. The results point to a severe measurement error in average Q. The paper finds that, controlling for expected profitability using analysts' earnings forecasts, cash flow becomes insignificant. This problem is particularly important in the literature that tests for an impact of financing constraints or capital market imperfections on corporate investment. Many empirical studies have added cash-flow variables to empirical models that relate investment rates to Tobin's Q, and interpreted significant coefficients on these cash-flow terms as evidence of 'excess sensitivity' of investment to the availability of internal funds. Although these findings are consistent with the presence of a cost premium for external sources of investment finance, they may also be explained, in the absence of financing constraints, by observed cash-flow or profits variables containing additional relevant information about expected future profitability not captured by Tobin's Q. Terms of use: Documents in EconStor mayRecent findings for US data suggest that much, if not all, of the significance of cash-flow variables in conventional estimates of Tobin's Q investment equations can be attributed to the failure of Tobin's Q to capture all relevant information about the expected profitability of current investment. Previous studies using UK company data have reported significant coefficients on cashflow variables, both in the context of models that relate investment to Tobin's Q, and in the context of reduced-form empirical models without explicitly forward-looking controls for expected profitability. The aim of the present study is to consider the robustness of these findings to alternative controls for expected futur...

Now close to 50 percent of GDP, this paper assesses the appropriateness of China's current investment levels. It finds that China's capital-to-output ratio is within the range of other emerging markets, but its economic growth rates stand out, partly due to a surge in investment over the last decade. Moreover, its investment is significantly higher than suggested by cross-country panel estimation. This deviation has been accumulating over the last decade, and at nearly 10 percent of GDP is now larger and more persistent than experienced by other Asian economies leading up to the Asian crisis. However, because its investment is predominantly financed by domestic savings, a crisis appears unlikely when assessed against dependency on external funding. But this does not mean that the cost is absent. Rather, it is distributed to other sectors of the economy through a hidden transfer of resources, estimated at an average of 4 percent of GDP per year. JEL Classification Numbers: E22, D60, D91, G21

This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate.This paper uses disaggregated trade data to assess how the expansion of China's production capacity and its changing production structure may be affecting its trade linkages with other countries. It finds that China is moving away from traditional assembly operations in its processing activities and its exports have started to rely more on domestically sourced components. In turn, China's imports and exports have begun to delink, with increased domestic sourcing contributing to the recent increase in its trade balance. In addition, as China moves up the value chain, both its imports and exports have become more sophisticated than in the past. As a result of these shifts, China may be becoming more exposed to fluctuations in the strength of the global economy, and changes in its exchange rate could have a bigger impact on the trade balance and the domestic economy than commonly believed.

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Abstract Evidence that cash flow has a significant effect on company investment spending, after controlling for Tobin's average Q, has often been interpreted as suggesting the importance of financing constraints. Recent work on measurement error in the Q model casts doubt on this interpretation. It is possible that the Q model may not be identified if there are 'bubbles' in stock market valuations that are both persistent over time and that are correlated with fundamental values. Cash flow may then provide additional information about expected profitability that is not captured by a poorly measured Tobin's average Q variable. We explore this hypothesis empirically using UK panel data on companies for which analysts' earnings forecasts are available from the IBES database. The results point to a severe measurement error in average Q. The paper finds that, controlling for expected profitability using analysts' earnings forecasts, cash flow becomes insignificant. This problem is particularly important in the literature that tests for an impact of financing constraints or capital market imperfections on corporate investment. Many empirical studies have added cash-flow variables to empirical models that relate investment rates to Tobin's Q, and interpreted significant coefficients on these cash-flow terms as evidence of 'excess sensitivity' of investment to the availability of internal funds. Although these findings are consistent with the presence of a cost premium for external sources of investment finance, they may also be explained, in the absence of financing constraints, by observed cash-flow or profits variables containing additional relevant information about expected future profitability not captured by Tobin's Q. Terms of use: Documents in EconStor mayRecent findings for US data suggest that much, if not all, of the significance of cash-flow variables in conventional estimates of Tobin's Q investment equations can be attributed to the failure of Tobin's Q to capture all relevant information about the expected profitability of current investment. Previous studies using UK company data have reported significant coefficients on cashflow variables, both in the context of models that relate investment to Tobin's Q, and in the context of reduced-form empirical models without explicitly forward-looking controls for expected profitability. The aim of the present study is to consider the robustness of these findings to alternative controls for expected futur...