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on Central and Western Asia |
| By: | Giovanni Capannelli (Asian Development Bank Institute (ADBI)); See Seng Tan |
| Abstract: | The formation of regional production networks in East Asia has occurred mainly through market forces, without much help from regional institutions in promoting the creation of a single Asian market. While this approach has served the region well in the past, the drastic changes experienced since the 2008–2009 financial crisis and the challenges Asian countries are facing—growing inequalities and competition, on the one hand, and enhanced threats to the environment and people’s health on the other—have rendered more urgent the need for intergovernmental cooperation at global and regional levels. Asia’s institutions for regionalism need strengthening through reform and innovation such as better governance and resourcing, greater and more effective participation and delegation of powers, overall streamlining of regional architecture, including the phasing out of outdated or irrelevant institutions and, where needed, the creation of new ones. Ultimately, given its rootedness in regional order, institutional efficacy is a function of the ability and willingness of its members, especially influential stakeholders, to collaborate. |
| Keywords: | Asian integration, regional institutions, Regionalism, Asian market, intergovernmental cooperation, regional production networks |
| JEL: | F15 F55 F59 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23326&r=cwa |
| By: | Yung Chul Park (Asian Development Bank Institute (ADBI)); Shinji Takagi |
| Abstract: | The paper uses the emerging Association of Southeast Asian Nations (ASEAN) Economic Community as a motivation to explore the issue of capital flow management in an economic community. Although there is an increasingly shared view that capital flow management measures should be part of the routine policy toolkit of emerging market economies, the logic of an economic community appears incompatible with extensive controls on capital flows. Substantial, if not complete, capital account liberalization must therefore take place across ASEAN. Few ASEAN countries are expected to have dismantled all capital account restrictions by 2015, thus requiring little need to introduce an entirely new set of capital flow management measures. Over the longer term, the ultimate requirements of an economic community seem to dictate that any remaining measures be market-based and not residency-based. Regional cooperation would be useful in enhancing individual country efforts, including collectively agreeing on the definition of a crisis and affirming the right of a member country to introduce an emergency measure in the event of a crisis. Our assessment is that most of the inflow restrictions could be removed quickly without creating additional risks; controls on private capital outflows could also be relaxed, albeit more judiciously, if for no other reason than to promote regional financial integration. |
| Keywords: | ASEAN Capital Account Liberalization, capital flows, economic community, regional cooperation, regional financial integration |
| JEL: | F33 F36 O53 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:eab:macroe:23329&r=cwa |
| By: | Masahiro Kawai (Asian Development Bank Institute (ADBI)); Peter J. Morgan |
| Abstract: | A key lesson of the 2007–2009 global financial crisis (GFC) was the importance of containing systemic financial risk and the need for a “macroprudential†approach to surveillance and regulation that can identify system-wide risks and take appropriate actions to maintain financial stability. By virtue of their overview of the economy and the financial system and their responsibility for payments and settlement systems, there is a broad consensus that central banks should play a key role in monitoring and regulating financial stability. Emerging economies face additional challenges because of their underdeveloped financial systems and vulnerability to volatile international capital flows, especially “sudden stops†or reversals of capital inflows. This paper reviews the recent literature on this topic and identifies relevant lessons for central banks, especially those in Asia’s emerging economies. Major topics discussed include the debate about the definition of financial stability, the consistency of a financial stability objective with the more traditional and well-established central bank objective of price stability, the appropriate governance structure for coordination of macroprudential policy with other financial supervisors and entities, and the appropriate policy instruments to achieve macroprudential policy objectives, including conventional, unconventional, and macroprudential tools. Finally, the paper considers issues involved with regional financial regulatory cooperation. Overall, the report concludes that the “lean versus clean†debate has been resolved largely in favor of the former, and that central banks should have a financial stability mandate and the policy tools to successfully pursue that mandate. |
| Keywords: | Asia, Central Banking, Financial Stability, GFC lessons, systemic financial risk, emerging economies, macroprudential, financial system, financial regulatory cooperation, central banks |
| JEL: | E52 F31 G28 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23328&r=cwa |
| By: | Luca Gattini (European Investment Bank, 98-100, Boulevard Konrad Adenauer, Luxembourg L-2950); Huw Pill (Goldman Sachs, Research Department); Ludger Schuknecht (German Ministry of Finance, Wilhelmstraße 97, 10117 Berlin, Germany and European Central Bank) |
| Abstract: | This paper revisits the evidence on the monetary policy transmission channels. It extends the existing literature along three lines: i) it takes a global perspective with aggregate series based on a broader set of countries (ca 70% per cent of the global economy) and a longer time (1960-2010) than previous studies. It, thereby, internalises potential international transmission channels (i.e. via global commodity prices); ii) it examines the interaction between monetary variables, asset prices (notably residential property) and inflation; and iii) it looks at the role of public debt for consumer price developments. On the basis of a VAR analysis, the study finds that i) global money demand shocks affect global inflation and also global commodity prices, which in turn impact on inflation; ii) global asset/property price dynamics appear to respond to financing cost shocks, but not to shocks to global money demand. Moreover, positive house price shocks exert a significant influence on inflation. From a global perspective, the study suggests recognition of global externalities of commodities and asset values as well as the close monitoring of real estate price developments. JEL Classification: E31, E51, E62, C32, F42 |
| Keywords: | VAR, global inflation, global house prices, global money |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:ecb:ecbwps:20121462&r=cwa |
| By: | Andrew F. Cooper (Asian Development Bank Institute (ADBI)) |
| Abstract: | The Group of Twenty (G-20) deserves credit for opening up of the “top table†of global governance to a wider representation of countries on a geographic basis in general and Asia in particular. As both a crisis committee in terms of the reverberations from the 2008 financial crisis and a potential global steering committee for a wider set of economic/developmental issues the summit process includes not only the association of leading association of leading emerging economies referred to as BRICS (Brazil, Russia, India, the Republic of China, and South Africa), but key middle powers such as the Republic of Korea. Yet, as a growing body of literature attests, it is clearly the contested nature of the G-20 that has come to the fore. This paper examines both the strengths and weaknesses of the G-20 from the perspective of input and output legitimacy. Notwithstanding some initial successes the constraints with respect to “output†have become more acute. Moreover, the “input†legitimacy of the G-20 has been eroded by the absence of the United Nations in the design and representational gaps. On the basis of this analysis the paper examines the debates and makes specific policy recommendations by which regionalism, the engagement of small states (through the role of Singapore and the 3-G coalition), and the expansion of the agenda can be utilized as a dynamic of reform for the G-20 without eroding the core strengths in terms of informality and issue-specific focus of the forum. |
| Keywords: | G-20, global governance, global steering committee, Regionalism |
| JEL: | D7 F02 G01 F55 |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:eab:govern:23323&r=cwa |
| By: | Chakraborty, Suparna; Otsu, Keisuke |
| Abstract: | What are the economic mechanisms that account for sudden growth spurts? Are these mechanisms similar across episodes? Focusing on the economic resurgence of the BRICs over the last decade, we employ the Business Cycle Ac- counting methodology developed by Chari, Kehoe and McGrattan (2007) to address these questions. Our results highlight that while efficiency wedges do contribute in a large part to growth, especially in Brazil and Russia, there is an increasing importance of investment wedge especially in the late 2000s, noted in China and India. The results are typically related to the stages of development with Brazil and Russia coming off a crisis to grow in the 2000s, while India and China were already on a stable growth path. Our conclusions are robust to alternative methodological extensions where we allow shocks to the trend component of efficiency as opposed to traditional shocks to the cyclical component, as well as to standard modifications where we allow for investment adjustment costs. Relating improvements in wedges to institutional and financial reforms, we find that financial development and improvements in effective governance in BRICs are consistent with improvements in investment and efficiency wedges that led to growth |
| Keywords: | business cycle accounting; efficiency; market frictions; trend shocks; investment adjustment costs |
| JEL: | E32 O57 O4 |
| Date: | 2012–08–30 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:41076&r=cwa |
| By: | Eric Werker (Harvard Business School, Business, Government and the International Economy Unit) |
| Abstract: | Kyrgyzstan is a landlocked, mountainous nation of five million people bordering three other landlocked former Soviet states and the remote Chinese province of Xinjiang. With the fall of the Soviet Union, Kyrgyzstan's production fell significantly, sending the economy back a generation to animal herding and cotton growing. Since the attacks of September 9, 2001, in the United States, however, there has been a new foreign-exchange earner, stemming from Russo-American competition over the use of an airfield-and the very allegiance of Kyrgyzstan itself. In preparation for its campaign in Afghanistan, the United States secured access to air fields in Kyrgyzstan and neighboring Uzbekistan with a mixture of foreign aid and infrastructure upgrading. However, in 2005, the United States was kicked out by the Uzbeks for criticizing a government-led massacre (Walsh, 2005; The Guardian), and the following year a new Kyrgyz government argued that the base contracts had disproportionately benefited cronies of the old regime. They demanded a 100-fold increase in "rent" from the base, to $200 million (Cooley, 2009; The New York Times). |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:13-026&r=cwa |
| By: | Aljaz Kuncic |
| Abstract: | This paper examines institutional determinants of bilateral trade in a thorough fashion, paying special attention to the issues of selecting institutional measures (using a new dataset), institutional endogeneity (cleansing the endogenous part) and state of the art gravity trade estimations (controlling for multilateral resistance). In terms of the institutional focus, we emphasize, as de Groot et al. (2004), that institutional distance can be an even more relevant determinant of trade than institutional quality on its own, but correct for the technical and substance shortcomings of the afore mentioned paper. We find that not all institutions matter for trade. The consistent effect is that of the quality of origin and destination country’s legal institutions, which both increase trade. In terms of political and economic institutions, only the quality of origin’s political institutions and destination’s economic institutions increase trade, the latter being most salient. More importantly, we highlight the importance of the effect of institutional distance on trade, showing that economic distance affects trade significantly and negatively, an effect practically impossible to dissipate in any specification. Our conclusion in this research is that countries which are more similar in terms of economic institutions, trade more with each other, and that the quality of legal institutions is always conducive to general trade, but surprisingly does not determine your trade partners. Finally, we show that the use of only one of the proxies generally used by the literature to control for institutional environmentcan be biased and misleading in terms of what is actually being controlled for. |
| Date: | 2012–08 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieasw:462&r=cwa |
| By: | Mauricio Soto; Frank Eich; Charleen Gust |
| Abstract: | Pension reform is a key policy challenge in Russia. This paper examines how pension spending could increase in Russia in the absence of reforms, quantifies the impact of some recent proposals, and suggests some alternatives that would ensure public pension benefits - relative to wages - not fall from current levels while containing spending. |
| Keywords: | Aging , Pension reforms , Pensions , Population , Russian Federation , |
| Date: | 2012–08–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:12/201&r=cwa |
| By: | Costas Meghir (Cowles Foundation, Yale University); Renata Narita (World Bank); Jean-Marc Robin (Dept. of Economics, Sciences Po) |
| Abstract: | It is often argued that informal labor markets in developing countries promote growth by reducing the impact of regulation. On the other hand informality may reduce the amount of social protection offered to workers. We extend the wage-posting framework of Burdett and Mortensen (1998) to allow heterogeneous firms to decide whether to locate in the formal or the informal sector, as well as set wages. Workers engage in both off the job and on the job search. We estimate the model using Brazilian micro data and evaluate the labor market and welfare effects of policies towards informality. |
| Keywords: | Informality, Unemployment, Job search, Wage posting, Equilibrium wage distributions, On the job search, Method of moments |
| JEL: | J24 J3 J42 J6 O17 |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1874&r=cwa |
| By: | Moritz Bonn (University of Siegen) |
| Abstract: | This paper studies how the existence of a minority culture influences the well-being of the native population and its attitude towards immigrants. In this context, I assume that multicultural interaction can be advantageous for immigrants and natives if intercultural obstacles and communication problems are abolished. It is found that certain shares of the immigrant as well as of the native population have incentives to acquire knowledge of the respective other culture since it enables them to interact with each other. I find that immigrants are more likely to acquire knowledge of the domestic culture than vice versa what I attribute to di?erences in the respective population size, assortative matching behavior and potentially asymmetric learning costs. The model further predicts that natives who have suffciently low costs of learning the foreign culture are willing to vote for free migration whereas those who have higher learning costs will be in favor of immigration restrictions. |
| Keywords: | Immigration, Cultural Interaction, Political Economy |
| JEL: | F22 J Z1 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201240&r=cwa |
| By: | Arthur Silve (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris) |
| Abstract: | This paper discusses how the economic structure and asset ownership shape economic and political outcomes. Using a simple model of the productive sector, I provide theoretical evidence that complementarities between productive assets reduce the stakes of political competition, and therefore reduce the intensity of the conflict over political power. In particular, these results provide a theoretical explanation for the frequent conflicts associated with abundant mineral resources. They are valid in a democratic setting, where this competition is electoral, but also in any other setting, where competition may be of a more violent nature. I then extend this analysis to show that complementarity of productive assets positively influences the willingness of elite groups to invest in property rights institutions, thus providing an economic explanation for why some countries have endogenously developed a context more favorable to business than others. |
| Keywords: | Complementarity ; Political Economy ; Property Rights ; Conflict |
| Date: | 2012–09 |
| URL: | http://d.repec.org/n?u=RePEc:hal:psewpa:halshs-00728703&r=cwa |
| By: | Chen, Chia-Ching; Chiu, I-Ming; Smith, John; Yamada, Tetsuji |
| Abstract: | Although there is an increasing interest in examining the relationship between cognitive ability and economic behavior, less is known about the relationship between cognitive ability and social preferences. We investigate the relationship between consequential measures of cognitive ability and measures of social preferences. We have data on a series of small-stakes dictator-type decisions, known as Social Value Orientation (SVO), in addition to choices in a larger-stakes dictator game. We also have access to the grade point averages (GPA) and SAT (formerly referred to as the Scholastic Aptitude Test) outcomes of our subjects. We find that subjects who perform better on the Math portion of the SAT are more generous in both the dictator game and the SVO measure. By contrast we find that subjects with a higher GPA are more selfish in the dictator game and more generous according to the SVO. We also find some evidence that the subjects with higher GPA and higher SAT outcomes offer more consistent responses. Our results involving GPA and social preferences complement previous work which employ measures of cognitive ability which are sensitive to the intrinsic motivation of the subject. Our results involving SAT scores are without precedent in the literature and suggest that measures of cognitive ability, which are less sensitive to the intrinsic motivation of the subject, are positively related to generosity. |
| Keywords: | dictator game; Social Value Orientation; altruism; intelligence |
| JEL: | D64 C91 |
| Date: | 2012–09–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:41078&r=cwa |