nep-sea New Economics Papers
on South East Asia
Issue of 2005‒04‒03
nineteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. The Asian Crisis Reconsidered By Takashi Shiraishi
  2. Relationship Banking in post Bubble Japan: Co-existence of soft-and hard budget constraint By Arikawa Yasuhiro; Miyajima Hideaki
  3. A Deviation Measurement for Coordinated Exchange Rate Policies in East Asia By Eiji Ogawa; Junko Shimizu
  4. Pitfalls of a State-Dominated Financial System: The Case of China By Genevieve Boyreau-Debray; Shang-Jin Wei
  5. Recent trends in the sources of finance for Japanese firms: has Japan become a 'high internal finance' country? By Kenichiro Suzuki; David Cobham
  6. "International Consumption Patterns among High-income Countries: Evidence from the OECD Data" By Istvan Konya; Hiroshi Ohashi
  7. "Saving and Interest Rates in Japan: Why They Have Fallen and Why They Will Remain Low" By R. Anton Braun; Daisuke Ikeda; Douglas H. Joines
  8. "Foreign Technology Acquisition Policy and Firm Performance in Japan, 1957-1970: Micro-aspects of Industrial Policy" By Kozo Kiyota; Tetsuji Okazaki
  9. "Bank Health and Investment: An Analysis of Unlisted Companies in Japan" By Shin-ichi Fukuda; Munehisa Kasuya; Jouchi Nakajima
  10. "Governance and Effectiveness of Japanese Aid: Towards Optimality" By Haider A. Khan
  11. Exchange rate depreciation and exports: The case of Singapore revisited By WenShwo Fang; Stephen M. Miller
  12. Does Exchange Rate Risk Affect Exports Asymmetrically? Asian Evidence By WenShwo Fang; YiHao Lai; Stephen M. Miller
  13. Buying Less, But Shopping More: Changes In Consumption Patterns During A Crisis By David McKenzie y Ernesto Schargrodsky
  14. A (New) Country Insurance Facility By Tito Cordella y Eduardo Levy Yeyati
  15. Volatility clustering, leverage effects, and jumps dynamics in emerging Asian equity markets By Daal, Elton; Naka, Atsuyuki; Yu, Jung-Suk
  16. Re-examining inflation and inflation uncertainty in developed and emerging countries By Daal, Elton; Naka, Atsuyuki; Sanchez, Benito
  17. The Market for Sweekstakes By Chew Soo Hong; Guofu Tan
  18. Discovering the Sources of TFP Growth: Occupational Choice and Financial Deepening By Hyeok Jeong; Robert M. Townsend
  19. Assessment of Relationship between Growth and Inequality: Micro Evidence from Thailand By Hyeok Jeong

  1. By: Takashi Shiraishi
    Date: 2005–03
  2. By: Arikawa Yasuhiro; Miyajima Hideaki
    Abstract: The purpose of this paper is to provide an overview of the relationship banking in Japan in the 1990s. We show the increasing dependence on bank borrowing in spite of the deregulation of bond market in the mid 1990s in terms of the debt composition, and we confirm the loan from main-bank also increases among the firms with higher bank borrowing. Then, we examine the effects of these facts on borrowing firm behavior. By estimating the employment adjustment function, we present that main bank did not discipline effectively firms that were required the corporate restructuring, while it encouraged the restructuring of the firm with relatively better performance.
    Date: 2005–03
  3. By: Eiji Ogawa; Junko Shimizu
    Abstract: The monetary authorities in East Asian countries have been strengthening their regional monetary cooperation since the Asian Currency Crisis in 1997. In this paper, we propose a deviation measurement for coordinated exchange rate policies in East Asia to enhance the monetary authorities' surveillance process for their regional monetary cooperation. We estimate an AMU (Asian Monetary Unit) as a weighted average of East Asian currencies according to the method to calculate the ECU used under the EMS before introducing the euro into some EU countries. We consider four types of AMU, which are based on trade volume, nominal GDP, GDP measured at PPP, and international reserves. After choosing both the AMUs based on GDP measured at PPP weight and trade weight from a viewpoint of stability of the AMU value in terms of a currency basket composed of the US dollar and the euro, we calculate the deviation indicators from the benchmark rates for each of the East Asian currencies. We compare both nominal and real deviation indicators by taking into account inflation rate differentials. The real deviation indicator should be adequate for surveillance over effects of exchange rate policy on real economy while the nominal one can be frequently watched in real time.
    Date: 2005–03
  4. By: Genevieve Boyreau-Debray; Shang-Jin Wei
    Abstract: State-owned financial institutions have been proposed as a way to address market failure, but the recent literature has also highlighted their pathological problems. This paper studies the case of China for pitfalls of a state-dominated financial system, including possible segmentation of the internal capital market due to local government interference and mis-allocation of capital. Even without formal legal prohibition to capital movement across regions, we find that capital mobility within China is low. Furthermore, to the extent some capital moves around the country, the government (as opposed to the private sector) tends to allocate capital systematically away from more productive regions toward less productive ones. In this context, a smaller role of the government in the financial sector might increase economic efficiency and the rate of economic growth.
    JEL: G1 F3
    Date: 2005–03
  5. By: Kenichiro Suzuki; David Cobham
    Keywords: financial systems, corporate finance, bank-industry relationships, main bank, firm size, Japan.
    JEL: G1 G3
  6. By: Istvan Konya (Department of Economics, Magyar Nemzeti Bank); Hiroshi Ohashi (Faculty of Economics, University of Tokyo)
    Abstract: The paper analyzes product-level consumption patterns among countries in the OECD in the period from 1985 to 1999. Estimation results find robust evidence of strong convergence in cross-country consumption patterns. The paper also finds a relationship between openness and the cross-country consumption pattern.
    Date: 2005–03
  7. By: R. Anton Braun (Faculty of Economics, University of Tokyo); Daisuke Ikeda (Bank of Japan); Douglas H. Joines (Marshall School of Business, University of Southern California)
    Abstract: This paper quantifies the role of alternative shocks in accounting for the recent declines in Japanese saving rates and interest rates and provides some projections about their future course. We consider four distinct sources of variation in saving rates and real interest rates: changes in fertility rates, changes in survival rates, changes in technology and changes in uninsurable labor income risk. The emprical relevance of these factors is explored using a computable dynamic OLG model. We find that the combined effects of demographics and slower total factor productivity growth successfully explain both the levels and the magnitudes of the declines in the saving rate and the after-tax real interest rate during the 1990s. Model simulations indicate that the Japanese savings puzzle is over.
    Date: 2005–03
  8. By: Kozo Kiyota (International Graduate School of Social Sciences, Yokohama National University and RIETI); Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: We examine the determinants and effects of technology acquisition licensing, using firm-level data between 1957 and 1970. Our results indicate that in technology acquisition licensing, the government screened a firm's application based on (i) the industry that the firm belonged to and (ii) its past experience of technology acquisition. As a result, inefficient firms with considerable experience tended to acquire more technologies before deregulation. Despite this screening process, the technology acquisition policy contributes to improve a firm performance: The firms with acquired technology succeeded in capital accumulation, which results in much faster growth of labor productivity.
    Date: 2005–03
  9. By: Shin-ichi Fukuda (Faculty of Economics, University of Tokyo); Munehisa Kasuya (Research and Statistics Department, The Bank of Japan); Jouchi Nakajima (Graduate School of Economics, University of Tokyo)
    Abstract: To the extent that a borrower faces switching costs in a relationship with an individual bank, bank-specific financial health might affect a borrower's cost of funds. The costs would be particularly large for firms that have a close relationship with limited number of banks. The purpose of this paper is to investigate whether weakened financial conditions of banks reduced investment of small and medium firms in Japan. Estimating Tobin's Q investment functions, we examine the determinants of investment for unlisted Japanese companies in the late 1990s and the early 2000s. We find that several measures on bank-specific financial health have significantly large impacts on borrower's investment, even when observable characteristics relating to Tobin's Q, cash-flow, and leverage are controlled for. We also find that multiple banking relationships, which tend to have a negative impact on investment in general, may be beneficial in relieving a hold up problem when deteriorated bank health does matter.
    Date: 2005–03
  10. By: Haider A. Khan (GSIS, University of Denver)
    Abstract: In this paper I have tried to pursue two related objectives. First, I have tried to gauge the impact of Japanese aid on South and Southeast Asia. My second objective in this paper is to offer an approach to relate governance and aid-effectveness that could be applied to the aid and macroeconomic time-series data from the region. Using a bounded rationality format presented in a model that allows to progress towards optimality over time invites thinking along the lines of inductive learning to improve both governance and aid-effectiveness. Although Japan comes out ahead of many western donors, particularly, large ones such as the US and UK, there is still much room for improving aid-effectiveness. Both model-based and qualitative interview-based investigations in this paper point to donor and recipient policies that can be geared towards improving democratic governance, openness and grassroots empowerment in order to promote further aid-effectiveness.
    Date: 2005–03
  11. By: WenShwo Fang (Feng Chia University); Stephen M. Miller (University of Connecticut and University of Nevada, Las Vegas)
    Abstract: This paper revisits the weak relationship between exchange rate depreciation and exports for Singapore, using a bivariate GARCH-M model that simultaneously estimates time-varying risk. The evidence shows that depreciation does not significantly improve exports, but that exchange rate risk significantly impedes exports. In sum, Singaporean policy makers can better promote export growth by stabilizing the exchange rate rather than generating its depreciation.
    Keywords: depreciation, exchange rate risk, exports, bivariate GARCH-M model
    JEL: F14 F31
    Date: 2004–12
  12. By: WenShwo Fang (Feng Chia University); YiHao Lai (Feng Chia University); Stephen M. Miller (University of Connecticut and University of Nevada Las Vegas)
    Abstract: The effects of exchange rate risk have interested researchers, since the collapse of fixed exchange rates. Little consensus exists, however, regarding its effect on exports. Previous studies implicitly assume symmetry. This paper tests the hypothesis of asymmetric effects of exchange rate risk with a dynamic conditional correlation bivariate GARCH(1,1)-M model. The asymmetry means that exchange rate risk (volatility) affects exports differently during appreciations and depreciations of the exchange rate. The data include bilateral exports from eight Asian countries to the US. The empirical results show that real exchange rate risk significantly affects exports for all countries, negative or positive, in periods of depreciation or appreciation. For five of the eight countries, the effects of exchange risk are asymmetric. Thus, policy makers can consider the stability of the exchange rate in addition to its depreciation as a method of stimulating export growth.
    Keywords: depreciation, exchange rate risk, exports, bivariate GARCH-M model
    JEL: C32 F14 F31 F41
    Date: 2005–03
  13. By: David McKenzie y Ernesto Schargrodsky
    Abstract: Market research data are utilized to examine the use of changes in shopping behavior as a method of mitigating the effects of the 2002 Argentine economic crisis. Although the total quantity and real value of goods purchased fell during the crisis, consumers are found to be spending more days shopping. This increase in shopping frequency occurs through consumers purchasing lower-quality goods from a wider variety of shopping channels. This paper provides the first estimates of the magnitude of such effects during a recession, and suggests that this increase in shopping frequency can be an important coping mechanism for households. Shopping more often is shown to enable households to seek out lower prices and locate substitutes, allowing a given level of expenditure to buy more goods.
    Date: 2005
  14. By: Tito Cordella y Eduardo Levy Yeyati
    Abstract: To cope with the self-fulfilling liquidity runs that triggered many recent financial crises, we propose the creation of a country insurance facility. The facility, which we envisage as complementary to the existing multilateral lending facilities, would provide eligible countries with automatic access to a credit line at a predetermined interest rate. Eligibility criteria should be easily verifiable, focus on debt sustainability, and take into account the currency and maturity composition of the debt. Other critical design issues considered here include the size of the facility, its duration and charges, and the exit costs for a country that loses eligibility.
    Date: 2005
  15. By: Daal, Elton; Naka, Atsuyuki; Yu, Jung-Suk
    Abstract: This paper proposes a mixed GARCH-Jump model that is tailored to the specific circumstances arising in emerging equity markets. Our model accommodates lagged currency returns as a local information variable in the autoregressive jump intensity function, incorporates jumps in the returns and volatility, and allows volatility to respond asymmetrically to both normal innovations and jump shocks. The model captures the distinguishing features of the Asian index returns and significantly improves the fit for those markets that were affected by the 1997 Asian crisis. Our proposed model yields higher levels of conditional kurtosis and superior forecasts of the expected arrival rate of jumps.
    Keywords: Jumps, Volatility, Leverage effects, Emerging markets, Asia, Equity markets
    Date: 2004–09–30
  16. By: Daal, Elton; Naka, Atsuyuki; Sanchez, Benito
    Abstract: This study examines the relationship between inflation and inflation uncertainty for both developed and emerging countries using the asymmetric power GARCH model. We find new evidence that suggests that positive inflationary shocks have stronger impacts on inflation uncertainty for mainly Latin American countries. We also find that inflation causes inflation uncertainty for most countries but the evidence for causality of the opposite direction is mixed.
    Keywords: Inflation, Emerging nations, Latin America
    JEL: C22 E31
    Date: 2004
  17. By: Chew Soo Hong; Guofu Tan
    Abstract: This paper studies the market for monopolistically supplied sweepstakes. We derive equilibrium demands for fixed-prize and variable-prize sweepstakes and determine the profit maximizing prize level and payout ratio respectively. It can be profitable to offer each type of sweepstake when there are large enough number of weighted utility consumers who have constant absolute risk attitudes, are strictly averse to small as well as symmetric risks, and display longshot preference behavior. Moreover, for the variable-prize sweepstake, the supplier will generally find it profitable to combine sweepstakes from two populations, o?ering a single sweepstake to the combined population. This corroborates the recent spate of mergers of smaller state lotteries into larger ones.
    Keywords: Sweepstakes, risk aversion, longshot preference behavior, weighted utility model, Nash equilibrium
    JEL: D40 D80 L1 H40
    Date: 2004–10
  18. By: Hyeok Jeong; Robert M. Townsend
    Abstract: Total factor productivity (TFP) growth is measured as a residual and its sources typically remain unknown inside the residual. This paper aims to identify the underlying sources of this residual growth, being explicit about both micro underpinnings and transitional growth. The key forces are occupational choice and limited access to credit. We develop a method of growth accounting that decomposes not only the overall growth but also TFP growth into four components: occupational shifts, financial deepening, capital heterogeneity, and sectoral Solow residuals. Thus we explicitly evaluate the quantitative importance of micro impediments to trade such as credit constraint on aggregate growth dynamics, in particular the TFP dynamics. Applying this method to Thailand, which experienced rapid growth with enormous structural changes for the two decades between 1976 and 1996, we find that 73 percent of TFP growth can be explained on average by occupational shifts and financial deepening, without presuming exogenous technical progress. Expansion of credit is a major part of this explained TFP growth. The remainder TFP growth is related to the sectoral Solow residuals, which are determined by the endogenous interaction between the price dynamics of wage, interest rate, and profits and the evolution of wealth distribution. The nature of this interaction between price dynamics and wealth distribution depends on access to credit, and the di¤erences in measured TFP growth across subgroups di¤erentiated by any specific characteristics may reflect the varying degrees of limited access to credit rather than subgroup-specific technical changes. The above key forces of TFP also provide a micro foundation of the relationship between growth and inequality. The inequality among the non-intermediated a¤ects the growth of the intermediated. The growth of the intermediated trickles down to the non-intermediated and reduces inequality among them.
    Keywords: Total Factor Productivity, Occupation Choice, Financial Deepening
    JEL: O47 O16 J24 D24
    Date: 2005–03
  19. By: Hyeok Jeong
    Abstract: This paper shows that growth and income distribution dynamics are closely linked through occupation, financial intermediation, and education. We use the micro data from Thailand for 1976-1996. The compositional changes across these characteristics account for half of the Thai inequality increase and forty percent of the Thai growth and poverty reduction. Financial deepening and educational expansion contributed to increasing inequality while occupational transformation contributed to poverty alleviation. The changes in income gaps across the income-status groups, that is, divergence and then convergence, give rise to inverted- U inequality dynamics. These two growth-related components of inequality dynamics, composition and income-gap dynamics, explain virtually all the change in overall inequality, except its initial rise. Thus, inequality dynamics can be viewed as integral part of wider process of growth as Kuznets speculated.
    Keywords: Kuznets Dynamics, Growth, Inequality, Poverty
    JEL: D31 O41 I32
    Date: 2005–03

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