ECONOMIC DEVELOPMENT

• Economic Miracle - The region’s recent economic history has been marked by an “economic miracle” that spanned several decades followed by a severe financial and economic crisis. Problems of widespread poverty and economic inequality remain despite significant economic progress.
• Gross Domestic Product - the total value of production in an economy
• Human Development Index - The United Nations Development Program (UNDP) developed the HDI in the late 1980s and has been publishing it since 1990. This index has three components: per-capita income and two additional measures-life expectancy at birth, and level of educational attainment that combines adult literacy and educational enrollment rates.
• Healthy Life Expectancy -A measure used by the World Health Organization (WHO) summarizes the expected number of years to be lived in “full health.” The average number of years a person can expect to live in good health.
• Green Gross National Product - One of the more recent approaches developed to address the inherent shortcomings of GDP and GNP as growth and development measures is based on what is known as the “green” system of national accounting. Green GNP is the informal name given to national income measures that are adjusted to take in to account the depletion of natural resources (both renewable and non-renewable) and environmental degradation.
• Exchange Rate Method - uses the exchange rate between the local currency and the US dollar to convert the currency into its US Dollar Equivalent. A country’s GDP and GDP per capita would then be valued accordingly, in US Dollars.
• Purchasing Power Parity Method - The purchasing power parity method develops a cost index for comparable baskets of consumption goods in the local currency and then compares this with prices in the United States for the same set of commodities.  A country’s PPP is defined as the number of units of the country’s currency required to buy the same amount of goods and services that a dollar would buy in the United States.
• Output - is derived by combining various factors of production, which include land, capital, and labor.
• The production function is a useful tool for analyzing theprocess of economic growth.
• A production function relates the inputs of the production process, such as labor (L) and capital (K), to the output/income (Y) from the proess. This relationship can bestated in a number of ways.
• In some cases, this discrepancy or residual is quite large. This residual has been called total factor productivity (TFP), or multifactor productivity.
• Total Factor Productivity - pertains to the efficiency with which the inputs are combined to produce output.
• The production possibility frontier (PPF) is a curve depicting the best possible combination of goods that is produced in an economy-best in the sense that the combination utilizes all the available inputs efficiently and minimizes waste.
• Economic efficiency is boosted in a static sense (static efficiency) if firms move from inside the production possibility frontier toward the frontier itself.
• Embodied technical progress has to do with the changing nature of the inputs into the production process. These would include more highly skilled and computer-literate workers, or less stressed and more congenial workers, or the installation of new innovations in in capital equipment.
• Keynesian Theory -  These models stress the accumulation of capital. They include Rostow’s (1960) stages of growth model and the Harrod-Domar growth model. The models do not explicity consider the law of diminishing returns to capital which can take effect s growth proceeds. In this sense, they are not particularly realistic.
• Neoclassical Theory - These models stress the neoclassical economic principle that factors of production should be paid the value of their marginal products. In these models, the law of diminishing returns can operate and there is mobility of factors to seek their highest return.
• Power-balance Theory -  These models stress international power balance as an important factor in development, including the terms and patterns of trade which tend to keep some countries poor while other countries get richer. In one sense, the international power-balance model can be considered as a subclass of the neoclassical model where there is a lack of factor mobility in international trade.
• Structural Theory - These models emphasize the shifts in resources between different sectors on the supply side. These theories discuss the transition from labor-intensive agriculture, which relies on traditional, low-productivity farming techniques, to modern, high-productivity industries which have benefited from innovation and more intensive use of capital and technology.
• New Growth Theory - The most recent growth theories, simply called “new growth theories,” try to endogenize technical progress and make use of assumptions of increasing returns to scale and positive externalities. These assumptions contrast sharply with the neoclassical model which stresses diminishing returns and a slowdown of growth to a steady-state rate
• The pace of economic growth and structural change in many Asian countries in the past thirty to forty years ranks as one of the most outstanding features of recent world economic history. Is has been termed the “Asian growth miracle.”
• Absolute Convergence - The hypothesis that poor countries tend to grow faster per capita than rich countries – without conditioning on any other characteristic of the economies – is referred to as absolute convergence. The Solow model says that all economies will converge to the same level of per-capita and per-capita income irrespective of where they started out.
• Conditional Convergence - The hypothesis that poor countries tend to grow faster per capita than rich countries – without conditioning on any other characteristic of the economies – is referred to as absolute convergence. The Solow model says that all economies will converge to the same level of per-capita and per-capita income irrespective of where they started out.
• Inadequate Management System - The financial sectors in these countries were unable to efficiently handle and disburse the massive inflows of foreign funds, which allowed them to invest as much as 40-50 percent of GDP when economic growth was in excess of 8 percent per annum. More than US$400 billion was invested from overseas sources during the first half of the 1990s. Stock market values also rose rapidly, and a property boom ensued. This was unsustainable and inconsistent with efficient resource allocation.
• Ineffective Sterilization of Capital Inflows - The sterilization mechanism that could have been used to choke off some of the excess demand generated by the influx of capital was constrained by thin markets for government securities and a fixed exchange rate. In such a situation, the greater the level sterilization undertaken, the greater the tendency for the spread between domestic and offshore interest rates to increase. This simply provided an even larger inducement for capital inflows.
• Restrictions on Foreign Banks’ Entry - Another factor that aggravated these problems was the restriction on the entry of foreign banks and financial institutions. Apart from Hong Kong and, to lesser extent, Singapore, East Asian countries do not encourage the entry of foreign firms providing financial services, compared with other countries at similar levels of development .
• Nonperforming Loans - As the economies overheated in 1995 and 1996, banks made many risky loans. Supervision and regulation of the financial systems in these countries were inadequate. Unsound projects were approved, uncollateralized loans were made, offshore dollar borrowing, which were unhedged, balooned – taking advantage of low interest rates in the United States.
• High Costs of Financial Services - Cross-country empirical evidence compiled by the World Bank suggests that the limited internationalization of the financial sector also led to higher costs of financial services (higher interest margins and lending rates) to borrowers and slower institutional development.
• Exchange Rates - have strengthened from their lows in the first part of 1998. This extends to all currencies, even the Indonesian rupiah, the most adversely affected currency. Depreciation vis-à-vis pre-crisis levels was between 15 and 30 percent as of July 2002.
• Equity Prices - Stock prices also rebounded. In Korea, they had risen above pre-crisis levels by the middle of 1999. Stock markets elsewhere in Asia also rebounded as funds from the rest of the world started to return. This served to reinforce the optimistic feeling that was spreading throughout the region.
• Fund managers tend to act together to pull out of individual markets, either because of a herd instinct leading to a contagion effect, or because these markets do not offer the flexibility of a more structured withdrawal.