Thread by @Brad_Setser

.@TheEconomist highlights Asia's savings glut this week

"Over the past five years East Asia’s current-account surplus has averaged about $525bn annually, a touch higher in cash terms than the average in the five years preceding the 2008 crisis."

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economist.com/finance-and-ec…

@TheEconomist The thing is, I think the Economist slightly understates the case ...

Drawing on World Bank numbers, they put regional savings in East Asia and the Pacific at around 35% of regional GDP (about where it was in the 1990s)

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@TheEconomist I would use the IMF's WEO data, and look at Japan, the NIEs (Korea, HK, Singapore and Taiwan) and China.

That group's savings is around 40% of their collective GDP -- as high as it has ever been

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@TheEconomist As the Economist notes, the biggest exports of savings these days are the Asian NIEs (especially Singapore, Taiwan and Korea). But I wouldn't overlook the recent return of China's current account surplus either

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@TheEconomist The fall in China's current account surplus in 2018 stemmed from a really high level of investment absorbing a still extremely high level of savings (~ 45% of GDP). With investment falling back a bit in 2019, China returned to a globally significant surplus.

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@TheEconomist And the Economist grades recent real exchange rate moves in Asia (7 of the 16 countries that have seen RER appreciations of more than 5% since 2010 are Asian) on a fairly generous curve ...

As 2010 is a generous starting point. Try going back to 1996 ...

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@TheEconomist I am much less impressed by the real appreciation of the Korean won and Taiwan dollar from their 2010 levels than by the fact that both have real effective exchange rates below their pre-Asian crisis levels ... despite significant technological convergence

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@TheEconomist The recent improvements in transparency in fx intervention are also in my view graded on a fairly generous curve ...

"Some countries have also taken steps to make their role in currency markets more transparent"

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@TheEconomist Many emerging markets report intervention monthly with a month lag. Singapore's decision to report 6ms of activity with a 6m lag is thin gruel. Especially as Singapore continue not to disclose the size of the GIC ...

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@TheEconomist Korea is slowly moving toward disclosure of 3ms of data with a 3m lag, but it isn't clear if there disclosed numbers include Korea's fx swaps (if they aren't included, that's a big loophole). I am not sure this is improvement over Korea's existing monthly BoP

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@TheEconomist And Taiwan obviously doesn't disclose much of anything -- as it doesn't report any data on the CBC's forward book.

(I should note that my central estimate of the size of their undisclosed swap book puts it at ~ 25% of their disclosed reserves. 40% of the upper bound)

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