nep-sea New Economics Papers
on South East Asia
Issue of 2005‒04‒16
eighty papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Banking Sector Strenght and the Transmission of Currency Crises By Allard Bruinshoofd; Bertrand Candelon; Katharina Raabe
  2. Is playing alone in the darkness sufficient to prevent informational cascades? By Annamaria Fiore; Andrea Morone
  3. Higher Order Expectations in Asset Pricing By Philippe BACCHETTA; Eric VAN WINCOOP
  4. Do Major Financial Crises Provide Information on Sovereign Risk to the Rest of the World? A Look at Credit Default Swap Markets. By Didier Cossin; Gero Jung
  5. IMF concern for reputation and conditional lending failure: theory and empirics By Silvia Marchesi; Laura Sabani
  6. The Kyoto agreement and Technology Spillovers By Golombek, Rolf; Hoel, Michael
  7. Crop Choice, Farm Income, and Political Relations in Myanmar By Takashi Kurosaki
  8. Inflation, Central Bank Independence and the Legal System. By Bernd Hayo; Stefan Voigt
  9. Impact of Ownership Structure on the Performance of China’s Feed Mill Sector, The By Fabiosa, Jacinto F.
  10. "Determinants of Minority–White Differentials in Child Poverty" By Yuval Elmelech
  11. "Asset Ownership along Gender Lines: Evidence from Thailand" By Rania Antonopoulos; Maria Sagrario Floro
  12. Risk of the Chinese trade integration for the Italian trade specialisation By Alessia Amighini; Stefano Chiarlone
  13. Assessing the Impact of Indonesian Social Safety Net Programs on Household Welfare and Poverty Dynamics By Sudarno Sumarto; Asep Suryahadi; Wenefrida Widyanti
  14. Poverty Targeting in Indonesia: Programs, Problems and Lessons Learned By Ari A. Perdana; John Maxwell
  15. Sustaining East Asia's Economic Dynamism: How Aid Worked By Hadi Soesastro
  16. Protecting Education for the Poor in Times of Crisis: An Evaluation of a Scholarship Program in Indonesia By Robert Sparrow
  17. Asset Pricing Model with Robust Control: Recourse in Pessimism to Equity Premium By Eric F.Y. Lam; Gregory C. Chow
  18. Theory of Continuously-sampled Asian Option Pricing By Jin E. Zhang
  19. E-Finance Development in Korea By Choong Yong Ahn; Doo Yong Yang
  20. Governance and Poverty Reduction: Evidence from Newly Decentralized Indonesia. By Sudarno Sumarto; Asep Suryahadi; Alex Arifianto
  21. Regional Cooperation towards Multilateral Arrangements on Agriculture, Labour, and Environment in the Context of Globalisation: The Case of Indonesia By Linda Christanty; Raymond Atje
  22. Decentralization and the Forestry Sector: Opportunities and Challenges By Linda Christanty; Raymond Atje; Kurnya Roesad
  23. Third World States in the Midst of the Cold War: A Study of ASEAN’s Decision to Establish the Zone of Peace, Freedom and Neutrality (ZOPFAN) Proposal, 1971-1972 By Shafiah Fifi Muhibat
  24. ASEAN: Regional Economic Cooperation and Its Institutionalization By Hadi Soesastro
  25. Challenges to APEC Trade Policy: The Doha Development Agenda and RTAs/FTAs By Hadi Soesastro
  26. Assessing Democratisation in Southeast Asia: Towards Regional Grassroots Empowerment By Christine Susanna Tjhin; Aries A. Arugay; Herman Joseph S. Kraft
  27. Social Security Reform in Indonesia: An Analysis of the National Social Security Bill (RUU Jamsosnas) By Alex Arifianto
  28. Indonesia's Transition to Decentralized Governance: An Evolution at the Local Level By Widjajanti I. Suharyo
  29. The Macroeconomic Consequences of Terrorism By S. Brock Blomberg; Gregory D. Hess; Athanasios Orphanides
  30. Exchange Rate Volatilities and Time-varying Risk Premium in East Asia By Chae-Shick Chung; Doo Yong Yang
  31. The Impact of Fiscal Policy on Income Distribution and Poverty: A Computable General Equilibrium Approach for Indonesia By Yose Rizal Damuri; Ari A. Perdana
  32. Economic Crisis and Trade Liberalization: A CGE Analysis On The Forestry Sector By Tubagus Feridhanusetyawan; Yose Rizal Damuri
  33. Indonesia in Crisis: A Macroeconomic Perspective By Tubagus Feridhanusetyawan; Mari Pangestu
  34. Dynamics of Open Economy Business Cycle Models: The Case of Korea By Hyungdo Ahn; Sunghyun H. Kim
  35. Complementarity of Horizontal and Vertical Multinational Activities By Sungil Bae; Tae Hwan Yoo
  36. Locating Multinational Companies in China: Korean and Japanese Companies By Sung Jin Kang; Hong Sik Lee
  37. Who should own Indonesia’s forests? Exploring the links between economic incentives, property rights and sustainable forest management By Raymond Atje; Kurnya Roesad
  38. Agricultural-Forestry Linkages: Development Of Timber And Tree Crop Plantations Towards Sustainable Natural Forests By Erwidodo; Satria Astana
  39. Economic Adjustment and the Forestry Sector: Does Removing the Log Export Ban Matter Much? By Arya B. Gaduh; Kurnya Roesad
  40. Corporate Restructuring in Korea; Empirical Evaluation of Corporate Restructuring Programs By Choong Young Anh; Doo Yong Yang
  41. Children of international migrants in Indonesia, Thailand, and the Philippines: a review of evidence and policies By John Bryant
  42. New-Keynesian Macroeconomics and the Term Structure By Seonghoon Cho; Antonio Moreno; Geert Bekaert
  43. Accounting for Agricultural Decline with Economic Growth in Taiwan By Ling Sun; Lilyan E. Fulginiti; E. Wesley Peterson
  44. Productivity Growth in China: Evidence from Chinese Provinces By Xiang Ao; Lilyan E. Fulginiti
  45. LDC Agriculture: Non-parametric Malmquist productivity indexes By Lilyan E. Fulginiti; Richard K. Perrin
  46. Market price of risk implied by Asian-style electricity options By Rafal Weron
  47. Herd Behavior in a Laboratory Financial Market By Marco Cipriani; Antonio Guarino
  48. Measurement of Financial Risk Persistence By Cornelis A. Los
  49. Assessing Financial Evolution By Kirby Adam J.R. Faciane
  50. Growth and Convergence in Southeast Asia Sugarcane Industries By Erlangga Agustino Landiyanto; Wirya Wardaya
  51. Structural Change and Its Impact on Productivity in Japan, Korea, and Singapore (1970-2000) By K. Ali Akkemik
  52. Indirect and Compounded Effects of External Crises on Growth in Emerging Markets By Martin Melecky
  53. The Changing Role of the Yen/Dollar Exchange Rate for Japanese Monetary Policy By Gunther Schnabl; Christian Danne
  54. Long–term Business Relationships between Consignor and Trucking Carrier in Japan By Norihiro KASUGA; Akio Torii
  55. The Unbalanced Uruguay Round Outcome: The New Areas in Future WTO Negotiations By J. Michael Finger; Julio J. Nogués
  56. Unequal Exchange: Developing Countries in the International Trade Negotiations By Julio J. Nogues
  57. Does tariff liberalization increase wage inequality? Some empirical evidence By Branko Milanovic; Lyn Squire
  58. Japanese Saving Rate By Kaiji Chen; Ayse Imrohoroglu; Selo Imrohoroglu
  59. Measuring China's Fiscal Policy Stance By Sebastian Dullien
  62. Real Estate Prices, Borrowing Constraints and Business Cycles -A Study of the Japanese Economy By Suparna Chakraborty
  63. Chinese Regional Agricultural Productivity in the 1990'a By Haizhi Tong; Lilyan E. Fulginiti
  64. Do banking crises enhance efficiency? A case study of 1994 Turkish and 1997 Indonesian crises By Julien Reynaud; Rofikoh Rokhim
  65. If only I could borrow more! Production and consumption credit constraints in the Philippines By Marie Godquin; Manohar Sharma
  66. Trade and Workers: Evidence from the Philippines By Rana Hasan; Lan Chen
  67. Pathways to Innovation in Asia's Leading Electronics Exporting Countries: Drivers and Policy Implications By Dieter Ernst
  68. Global Production Networks, Innovation, and Work: Why Chip and System Design in the IT Industry are Moving to Asia By Dieter Ernst; Boy Luethje
  69. Internationalisation of Innovation: Why Chip Design Moving to Asia By Dieter Ernst
  70. Late Innovation Strategies in Asian Electronics Industries: A Conceptual Framework and Illustrative Evidence By Dieter Ernst
  71. Estimation of the J-Curve in China By Jaleel Ahmad; Jing Yang
  72. Searching for a New Role in East Asian Regionlization: Japanese Production Networks in the Electronics Industry By Dieter Ernst
  73. The Reasons for and the Impact of Antidumping Protection: The Case of People's Republic of China By Tianshu Chu; Thomas J. Prusa
  74. Impact of Population Aging on Japanese International Travel to 2025 By James Mak; Lonny Carlile; Sally Dai
  75. Organization, Program and Structure: An Analysis of the Chinese Innovation Policy Framework By Can Huang; Celeste Amorim; Joaquim Borges Gouveia; Mark Spinoglio; Augusto Medina
  76. Modelling Small Economy Exports: The Case of Singapore By Tilak Abeysinghe; Keen Meng Choy
  77. Medical Savings Accounts in Singapore: How much is adequate? By Ngee-Choon Chia; Albert K C Tsui
  78. Reverse Mortgages as Retirement Financing Instrument: An Option for “Asset-rich and Cash-poor” Singaporeans By Ngee-Choon Chia; Albert K C Tsui
  79. Pursuing Green Growth: Some Conflicts and Necessary Conditions for a Pragmatic Environmental Policy By Euston Quah
  80. Bilateral “WTO-Plus” Free Trade Agreements: The WTO Trade Policy Review of Singapore 2004 By S.M. Thangavelu; Toh Mun Heng

  1. By: Allard Bruinshoofd; Bertrand Candelon; Katharina Raabe
    Abstract: We show that, complementary to trade and financial linkages, the strength of the bankingsector helps explain the transmission of currency crises. Specifically, we demonstrate that the Mexican, Thai, and Russian crises predominantly spread to countries with weaknesses in their banking sectors. At the same time, the role of banking sector strength varies per crisis; where the Mexican crisis spread to countries with a strong presence of foreign banks in domestic credit provision, the Thai crisis disproportionately contaminated countries where the banking sector was most sensitive to currency realignments, while the Russian crisis spread to countries with inefficiencies in the banking sector.
    Keywords: Banking Sector Strength; Currency Crisis; Transmission Channels.
    JEL: F30 F32 F34
    Date: 2005–04
  2. By: Annamaria Fiore; Andrea Morone
    Abstract: Models of herd behaviour and informational cascades were theoretically developed in 1992 respectively by Banerjee (A simple model of herd behavior) and Bikhchandani, Hirshleifer and Welch (A Theory of Fads, Fashion, Custom and Cultural Change as Informational Cascades). Both articles pointed out the existence of an information externality that causes a welfare loss, and both proposed the idea that destroying an amount of information may turn out in a social improvement. Although this is an old idea and in the last years many features of herd behaviour and informational cascades were studied, this particular aspect was never developed or extensively analysed. In this article we will try to investigate this hypothesis both theoretically and experimentally.
    Keywords: Informational Cascades, Individual Decision Making, Experiments, Information Externality
    JEL: C92
  3. By: Philippe BACCHETTA (Study Center of Gerzensee, University of Lausanne and CEPR); Eric VAN WINCOOP (University of Virginia and NBER)
    Abstract: In this paper, we examine formally Keynes' idea that higher order beliefs can drive a wedge between an asset price and its fundamental value based on expected future payoffs. In a dynamic noisy rational expectations model, higher order expectations add an additional term, which we call the higher order wedge, to a standard asset pricing equation. Consistent with Keynes' reasoning we show that investment decisions are based not just on expected future payoffs, but also on anticipated future expectational errors made by the market. The latter are captured by the higher order wedge. We show that the expectation of future expectational errors by the market is perfectly rational when investors have both noisy public and private information. The main effect of this additional asset pricing term is to disconnect the price from the present value of future payoffs. We show that this effect can be quantitatively significant.
    Keywords: Beauty contest; Heterogeneous information
    JEL: G12 G14 D82
    Date: 2004–05
  4. By: Didier Cossin (IMD International and FAME); Gero Jung (Graduate Institute of International Studies)
    Abstract: The financial innovations of the late 1990s have led to the emergence of a significant number of new instruments, in particular in the market for hedging credit risk. This paper, based on an original dataset of transactions and quotes, looks at credit default swaps drawn on sovereign countries. The study of the credit default swap market around major financial crises leads to several results: Markets' consideration of ratings around the world changes dramatically after major financial crises, even for those countries that are not in crisis. While ratings seem suddenly to matter more, pricing uncertainty increases as well. Thus large financial crises appear to create strong information uncertainty, rather than resolve previous uncertainty. After a major crisis event, there is significant ‘flight-to-quality’ that is accompanied by a strong relative rise of demand for sovereign credit protection. We also document the extra-significance of transaction data compared to quote data in an OTC market. Overall, sovereign ratings appear to be the pricing tool of last resort when crises disturb markets.
    Keywords: Credit Default Swaps, Sovereign Risk, Financial Crises, Event Study
    JEL: G13 F34 G15
    Date: 2005–03
  5. By: Silvia Marchesi; Laura Sabani
    Abstract: One possible explanation for the unsatisfactory implementation of IMF conditionality has been attributed to the lack of credibility of the IMF threat of interrupting financial assistance in case of non compliance with the negotiated conditions. In this paper we suggest that such lack of credibility might be due to the dual role played by the IMF which acts at the same time as a creditor and a monitor of economic reforms. We show that the IMF incentive to hide its surveillance failures, in order to preserve its reputation of being a good monitor, may actually distort its lending decisions towards greater laxity (relative to social optimum) in punishing non-compliance with economic reforms. We have empirically tested such theoretical result by supposing that larger departures from efficiency of the IMF lending rule are associated with a longer relationship between a country and the IMF. The longer this relationship, the stronger the IMF reputation will be affected in case it ultimately decides to stop lending. Specifically, we have empirically investigated whether IMF disbursements are affected by the IMF own share of debt, which is taken as a proxy for the duration of the relationship between the Fund and a country. Our empirical results show that a higher IMF debt share does increase IMF disbursements.
    Date: 2005–04
  6. By: Golombek, Rolf (The Ragnar Frisch Centre for Economic Research); Hoel, Michael (Dept. of Economics, University of Oslo)
    Abstract: A significant reduction in global greenhouse gas emissions will require development of new technologies if such reductions are to be achieved without excessive costs. An important question is whether an agreement of the Kyoto type, which does not include elements related to research and development (R&D) of new technologies, will give sufficient incentives to develop such new technologies. On the one hand, since greenhouse gas emissions will become costly for countries and private producers, countries and individual producers will have incentives to undertake effort and costs to develop new technologies. On the other hand, R&D in one country is not only advantageous for this country, but usually also for other countries. The reason for this is that producers in these countries in many cases will learn from the R&D project, for example, through(informal) networks, journals, and in some cases through the import of goods from the country where the new technology is developed. The purpose of the paper is to discuss properties of an international climate agreement of the Kyoto type when R&D investments undertaken in one country are beneficial also for other countries. We examine whether a Kyoto type of agreement can provide the correct social amount of aggregate emissions and R&D investments in new technologies. We argue that the outcome of a Kyoto type agreement will differ from the social optimum. In particular, for a given level of abatement a Kyoto type agreement provides too little R&D investments relative to the social optimum.
    Keywords: Climate policy; Kyoto; international environmental agreements; R&D; technology spillovers.
    JEL: P28 Q54
    Date: 2005–04–06
  7. By: Takashi Kurosaki
    Abstract: Myanmar's agricultural economy is in transition from a planned to a market system. However, the economy does not seem to capture the full gains of productivity growth expected from such a transition. Using a micro dataset collected in 2001 and covering more than 500 households in eight villages with diverse agro-ecological environments, this paper shows that policy interventions in land use and agricultural marketing underlie the lack of income growth. Regression analyses focusing on within-village variations in cropping patterns show that the acreage share under nonlucrative paddy crops is higher for farmers who are under tighter control of the local administration.
    Keywords: reform, food policy, transitional economies, Asia, Myanmar
    Date: 2005–03
  8. By: Bernd Hayo; Stefan Voigt
    Abstract: We argue that a higher degree of de facto independence of the legal system from the other government branches as well as public trust in the legal system may reduce the average inflation record of countries through a direct and an indirect channel. The direct channel works by affecting potential output, while the indirect channel helps to increase the de facto independence of the central bank. In the empirical section of the paper, we present evidence in favor of both channels in a sample containing both industrial and Third World countries. A model that contains legal trust in addition to de jure central bank independence, checks and balances within government, and openness can explain 60% of the variation in the logarithm of the inflation rate.
    Keywords: Judicial Independence; Legal Trust; Central Bank Independence; Inflation
    JEL: D D H K
    Date: 2005–01
  9. By: Fabiosa, Jacinto F.
    Abstract: In the decade of the 1990s, China’s feed sector became increasingly privatized, more feed mills opened, and the scale of operation expanded. Capacity utilization remained low and multi-ministerial supervision was still prevalent, but the feed mill sector showed a positive performance overall, posting a growth rate of 11 percent per year. Profit margin over sales was within allowable rates set by the government of China at 3 to 5 percent. Financial efficiency improved, with a 20 percent quicker turnover of working capital. Average technical efficiency was 0.805, as more efficient feed mills increasingly gained production shares. This study finds evidence that the increasing privatization explains the improved performance of the commercial feed mill sector. The drivers that shaped the feed mill sector in the 1990s have changed with China’s accession to the World Trade Organization. With the new policy regime in place, the study foresees that, assuming an adequate supply of soy meal and an excess capacity in the feed mill sector, it is likely that China will allow corn imports up to the tariff rate quota (TRQ) of 7.2 mmt since the in-quota rate is very low at 1 percent. However, when the TRQ is exceeded, the import duty jumps to a prohibitive out-quota rate of 65 percent. With an import duty for meat of only 10 to 12 percent, China would have a strong incentive to import meat products directly rather than bringing in expensive corn to produce meat domestically. This would be further reinforced if structural transformation in the swine sector would narrow the cost differential between domestic and imported pork.
    Date: 2005–04–04
  10. By: Yuval Elmelech
    Abstract: This paper uses data from the 1993–2001 March Current Population Survey to estimate the extent to which child living arrangements, parental work patterns, and immigration attributes shape racial and ethnic variation in child poverty. Results from multivariate analyses and a standardization technique reveal that parental work patterns as well as child living arrangements are especially consequential for black and Puerto-Rican economic circumstances. Child immigration generation and parental length of residence seem to play a detrimental role in shaping poverty among Asian, Mexican, and Central/South American children. We also found that the extent to which differences in the composition of and returns to parental resources determine white-minority economic gaps varies substantially across racial and ethnic lines. The social and economic implications of the findings for understanding racial and ethnic inequality are discussed in the final section of the article.
    Date: 2005–02
  11. By: Rania Antonopoulos; Maria Sagrario Floro
    Abstract: Gender differences have long been documented in earnings, employment opportunities, and time spent within the unpaid care economy. This paper joins the recent efforts in the economics literature on gender differences in asset ownership. Specifically, it investigates whether a gender-specific composition in asset ownership between heads of households and spouses can be detected among low-income, urban households in Bangkok, Thailand. The present case study explores this issue empirically, using a sample of 134 couples from a 2002 survey that collected data at the level of the individual respondent on accumulated physical and financial assets. Both husband and wife were interviewed separately and the data gathered from the interviews include pertinent household and individual information on employment, credit and household decision-making issues. The findings suggest that asset composition varies by gender, indicating that further investigation is warranted on this topic. Tobit and Probit tests are used to examine the factors that may affect this gendered pattern.
    Date: 2005–02
  12. By: Alessia Amighini; Stefano Chiarlone
    Abstract: The move towards export-oriented development strategies by China has increased concerns about the ability of Italian manifactures to effectively face price competition from emerging economies. This paper explores the hypothesis that the superior quality of Italian goods could support Italian competitiveness, using Spain as a benchmark. The data confirm that, although Italian and Chinese specialisation patterns are very similar, there is no widespread overlapping at the product level, and when there is, Italian goods show a higher quality level. Nonetheless, during the last decade, trade overlap increased and quality gap narrowed, suggesting that China is putting increasing competitive pressures on Italian manufacturing. In order to maintain its qualitative advantage, there is urgent need in Italy for an increase in investment in product upgrading and innovation.
    Date: 2004–06
  13. By: Sudarno Sumarto (SMERU Research Institute); Asep Suryahadi (SMERU Research Institute); Wenefrida Widyanti (SMERU Research Institute)
    Abstract: In early 1998 the Government of Indonesia established several social safety net (SSN) programs to help the poor and the newly poor cope with the impact of the impending economic crisis, covering food security, employment creation, education, health, and community empowerment. This article evaluates the impact of these programs on household welfare and poverty, utilizing a panel data set of over 10 thousand households which were visited four times in a 14 month period. The impact of participation in the social safety net programs on household consumption is found to be generally positive. However, only the subsidized rice program appears to have significantly reduced the risk of poverty among participating households.
    Keywords: safety net programs, poverty dynamics, Indonesia, program evaluation
    Date: 2004–08
  14. By: Ari A. Perdana (Centre for Strategic and International Studies); John Maxwell (Australian National University)
    Abstract: This paper presents a discussion on some poverty alleviation programs that are specifically targeted to the poor. The programs covered in this paper are: Inpres Desa Tertinggal (IDT), Padat Karya (Employment), Food Security, Education and Health component of the postcrisis Social Safety Net package. Brief assessments of the programs show that the targeting of poverty alleviation programs in Indonesia has been a difficult and frustrating process for central government planners attempting to allocate scarce budgetary resources as efficiently and effectively as possible. Although poor families did benefit to a certain degree, all the programs that we have considered have suffered from two common problems: under-coverage and leakage. The paper concludes that the effectiveness of various poverty-targeted program in Indonesia are determined by, among other things, the type of targeting, administrative capacity, program design and publicity, and the quality of monitoring.
    Keywords: Indonesia, poverty, poverty targeting, poverty alleviation, Social Safety Net, Inpres Desa Tertinggal
    Date: 2004–03
  15. By: Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies)
    Abstract: This paper examines the role of foreign aid or development assistance in helping sustain East Asia’s economic dynamism. The first section discusses the changing landscape of development assistance and examines the place of East Asia in it. The second section focuses on the recent evolution of Japan’s development assistance policy. Japan is singled out as it has been the most important donor for countries in East Asia and is likely to remain so for many years to come. The third section looks at Japan’s ODA (official development assistance) from the perspective of selected East Asian countries and highlights the issues, lessons and the recommendations that have emerged in the region on how aid could work to help meet the challenges faced by the region.
    Keywords: foreign aid, development assistance, East Asia, Japan, official development assistance (ODA)
    Date: 2004–05
  16. By: Robert Sparrow (Vrije University Amsterdam, Tinbergen Institute)
    Abstract: This paper analyses the impact of an Indonesian scholarship program, which was implemented to preserve access to education for the poor during the Southeast Asian economic crisis. Allocation followed a decentralized design that involved both geographic and individual tarteging. The identification strategy exploits this decentralised structure, relying on instrumental variables constructed from regional miss-targeting at the initial phase of allocation. The results show that allocation of scholarships was pro-poor, but with substantial leakage to the non-poor. The program has been successful in increasing enrolment, especially for primary school aged children from poor rural households. Morevoer, the scholarships seem to have assisted households in smoothing consumption during the crisis, relieving pressure on households' investments in education and utilization of child labour.
    Keywords: social safety net, program evaluation, education, child labour, child labor, Asian economic crisis
    Date: 2004–06
  17. By: Eric F.Y. Lam (City University of Hong Kong); Gregory C. Chow (Department of Economics, Princeton University)
    Abstract: Calibrating the robust asset pricing model with power utility suggest the degree of robustness of 19th century US consumer-investor to be 0.00387. When constant relative risk aversion (CRRA) is 2 and subjective discount factor equals 0.99, the mean burden-compensation for reallocating a dollar from stock to bond is estimated to be 0.05090 annually. When this mean is above 0.04801, the mean-variance of intertemporal marginal rate of substitution meets the Hansen-Jagannathan (1991) type volatility bound. For CRRA of 4, 74.25% of the empirical equity premium is due to pessimism and the rest is due to excess return’s positive correlation with consumption.
    Keywords: Asset pricing, equity premium, investor pessimism, robust control
    JEL: G10 G12 E44
    Date: 2003–09
  18. By: Jin E. Zhang (Department of Economics and Finance, City University of Hong Kong)
    Abstract: This paper presents a theory of continuously-sampled Asian option pricing. For the geometric Asian options, we give the pricing formulas for both backward-starting and forward-starting cases. For the arithmetic Asian options, we show that the governing Partial Differential Equation (PDE) can not be transformed into a heat equation with constant coefficients, therefore does not have a closed-form solution of Black-Scholes type, i.e., in terms of cumulative normal distribution function. We then solve the PDE with perturbation approach , and obtain an analytical solution in a series form. Numerical results show that comparing with the exact numerical results of Zhang (2000) the series converges very fast and gives a good approximate value that is more accurate than any other approximate methods in the literature at least for the options tested in this paper. Graphical result shows that the solution converges globally very fast especially near the origin, in which area most of the traded Asian options fall.
    Keywords: Asian options, geometric mean, arithmetic mean, continuous sampling, partial differential equation, perturbation method
    JEL: G13
  19. By: Choong Yong Ahn (Korea Institute of International Economic Policy); Doo Yong Yang (Korea Institute of International Economic Policy)
    Abstract: E-finance in Korea has evolved since the late 1980s, when developments in information and telecommunication technology started to be applied to the financial industry. Since the 1990s, e-finance has led a paradigm shift in the financial industry as financial transactions in computer-based tools began increasing. There are several factors that contributed to e-finance development. Korea possess the basic requisite conditions to foster thriving e-finance, including an advanced IT infrastructure, several government e-commerce initiatives and financial restructuring resulting from the financial crisis. In fact, all of these factors have eliminated possible impediments to the development of e-finance in developing countries. This paper shows that the decision for the introduction of internet banking depends on the profit level for the bank rather than the asset size and/or operation costs. Intuitively, large banks are early takers in providing Internet banking de to a huge amount of initial investment costs to establish an Internet banking network. At the same time, cost inefficient banks are inclined to consider the introduction of Internet banking earlier to reduce inefficiency caused by replacing cost-inefficient infrastructure. However, Korea shows an interesting case such that the asset size and operation costs were irrelevant to the establishment of Internet banking networks. On the other hand, profitability was relevant to the introduction of Internet banking. This may imply that relatively profitable banks at the onset of the crisis were able to jump into e-finance earlier than non-profitable banks. Furthermore, this paper shows that the adoption of internet banking has a positive effect of bank profit.
    Keywords: e-fianance development in Korea, Internet Banking, financial industry
    JEL: G21 L86 C33
    Date: 2004–04
  20. By: Sudarno Sumarto (SMERU Research Institute); Asep Suryahadi (SMERU Research Institute); Alex Arifianto (SMERU Research Institute)
    Abstract: This study is the first attempt to systematically examine the impact of bad governance practices in Indonesia on poverty reduction. Indonesia is a country that has endured bad governance for a long period, but has also sustained significant poverty reduction. Prior to the onset of the economic crisis in mid 1997, the problem of bad governance in Indonesia was apparent but mostly ignored because it was compensated for by high economic growth. The advent of the economic crisis, however, has highlighted the seriousness of the problem. This study focuses on the impact of bad governance on the poor, the people who are most vulnerable to the impact of bad governance. By assembling scattered anecdotal evidence on how past and current practices of bad governance in Indonesia have hurt the poor, this study shows that the adverse impact of bad governance on the poor is real, systematically affects many people, and undermines the efforts to reduce poverty in the country. more systematic evidence on how bad governance affects povery reduction indicates that regions that practice better governance indeed experience faster poverty reduction and vice versa.
    Keywords: poverty reduction, governance, Indonesia, bad governance
    Date: 2004–03
  21. By: Linda Christanty (CFG Jakarta); Raymond Atje (Department of Economics, Centre for Strategic and International Studies)
    Abstract: This paper has, as its title suggests, discusses policy and regulatory development in the forestry sector for a period of more than 30 years. During this period the forestry sector has experienced a lot of changes. It has contributed significantly to the country’s economic development, especially during the later years prior to the crisis. At the onset of the crisis forestry-related activities, including plantations, were among the main producers of exported goods. This development was partly a result of various policies and regulations introduced during the period under consideration. Some of those policies had only short time horizons,and very often did not adhere to sound economic and environmental considerations. There has been an intense pressure on the government to improve the management of the forestry sector. It is doubtful however that there will soon be a major reform in the sector. Some of the old players are on their way out, but other interest groups that are vying to replace them. The nature of the game in the forestry sector has not changed that much over the years, i.e., it is still the one that nurtures rent seeking and predatory behavior.
    Keywords: Indonesia, forestry policy, regulations, New Order
    Date: 2004–02
  22. By: Linda Christanty (CFG Jakarta); Raymond Atje (Department of Economics, Centre for Strategic and International Studies); Kurnya Roesad (Department of Economics, Centre for Strategic and International Studies)
    Abstract: This paper looks into Indonesia’s recent experience with the decentralization process and assesses opportunities and challenges for the forestry sector. Despite its brief existence since only 2001 and the limited data available, decentralization in the forestry sector has shown some significant trends. The paper finds that co-ordination between different levels of government is still lacking, lacking a clear division of tasks between central, provincial and district governments. Indonesia’s move to a more market – based forestry governance system is currently impeded by the lack of a sound and secure property and tenure rights system, exacerbated by legal uncertainties, and weak monitoring and enforcement capacities on the local level. Overall, when compared to other forest-rich countries, decentralization has not sufficiently empowered regional and local governments in the forestry sector, as the central government retains most of the power to manage the country’s forests.
    Keywords: Indonesia, decentralisation, forestry sector
    Date: 2004–02
  23. By: Shafiah Fifi Muhibat (Department of International Relations, Centre for Strategic and International Studies)
    Abstract: The purpose of this paper is to analyse the decision making in ASEAN in its policy to declare Southeast Asia as a zone of peace, freedom and neutrality in 1971. Two significant and interrelated factors served as the basis for the ASEAN member states in their decision to establish the ZOPFAN proposal: first, the international and regional security condition during that period; and second, the differing national interests of each ASEAN state members which resulted in a compromise. The new power pattern in the region forced the ASEAN state members to come up with a scenario that could best protect regional security. Each state realised that its security might be in danger if the regional security situation did not improve. At this point, the ASEAN states decided to collaborate to guard themselves against the worst possible consequences. The fact that ASEAN decided to come up with such an optimistic policy is particularly interesting to observe, because it gives an insight of how the Third World states placed and saw themselves within the Cold War theatre.
    Keywords: Association of Southeast Asian Nations (ASEAN); Zone of Peace, Freedom and Neutrality (ZOPFAN), regional security, cold war
    Date: 2004–01
  24. By: Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies)
    Abstract: This paper discusses the need to beyond the old ‘ASEAN way’ and suggests the importance of further institutional deepening of economic cooperation in ASEAN, especially in the aftermath of the recent financial crisis. Hence, it suggests the need to develop of a ‘Common Market minus’, in which ASEAN brings in areas or sectors that are excluded from liberalization under the umbrella of the integration project and let them be managed through a common policy approach by newly created “regional units.” Yet, such a development needs to be carefully crafted, based on clear principles.
    Keywords: ASEAN, regional economic cooperation, institution building, ASEAN Vision 2020
    Date: 2003–08
  25. By: Hadi Soesastro (Department of Economics, Centre for Strategic and International Studies)
    Abstract: Recent development in global trade saw countries moving in multiple fronts in liberalising trade, utilising multilateral, regional and bilateral trade agreements to promote trade. This paper examines the issues surrounding this latest trend, noting the opportunities as well as dangers to global free trade associated with such an approach. In particular, it investigates implications of the growing numbers of regional trade agreements (RTAs) and free trade agreements (FTAs) within the APEC region, particularly in light of the Doha development agenda.
    Keywords: Asia-Pacific Economic Cooperation (APEC), World Trade Organization (WTO), Doha round, regional trade agreements (RTA), free trade agreements (FTA)
    Date: 2003–05
  26. By: Christine Susanna Tjhin (Department of Politics and Social Change, Centre for Strategic and International Studies); Aries A. Arugay (Institute for Strategic and Development Studies, Philippines); Herman Joseph S. Kraft (Institute for Strategic and Development Studies, Philippines)
    Abstract: This working paper illustrates the processes behind one of the ASEAN People’s Assembly (APA) initiatives, which is the democratisation assessment program for Southeast Asia. This working paper provides a preliminary conceptual framework and methodology for assessing democratisation in the region. This initiative should be recognised as a “work-in progress”, as the debates on democratisation and empowerment should ultimately involve the participation of more citizens in the region. As such, this initiative will be flexible to the inputs and insights of relevant stakeholders in the region that will definitely be facilitated by future endeavours.
    Keywords: Association of Southeast Asian Nations (ASEAN), democratisation, empowerment
    Date: 2004–03
  27. By: Alex Arifianto (SMERU Research Institute)
    Abstract: The Indonesian social security program is currently undergoing a fundamental overhaul designed to make the existing system work better for the beneficiaries and to extend social security coverage to more workers, both in the formal and informal sector. The existing scheme has not been successful in its aims to provide adequate social security benefits to beneficiaries because of its low coverage, limited benefits, and low investment returns, combined with poor governance. The government has proposed a plan to convert the current social security scheme, which is based on a provident fund system, into a compulsory social insurance system. The plan is analyzed in this paper in order to examine the possible impact of the proposed scheme on the Indonesian labor market, investment flows, the government budget, and the economy in general. From this analysis, we can conclude that there are several serious flaws in the government proposal as outlined in the proposed legislation, such as: the proposed scheme could worsen Indonesia’s labor market and investment climate, worsen the government’s budget deficits, and does not provide room for the private sector to provide social security benefits to Indonesians. Many have concluded that publicly-provided social security schemes are no longer a viable model for workers today. Instead private social security schemes would suit the health and retirement needs of today’s workers better than public social security schemes. Given the many problems facing the Indonesian public pension and healthcare system today, Indonesia should seriously consider adopting private social security programs to replace the current publicly provided scheme.
    Keywords: social security, public pension, national health insurance, Indonesia
    Date: 2004–09
  28. By: Widjajanti I. Suharyo (SMERU Research Institute)
    Abstract: Indonesia’s decentralization reform is now in its third year of implementation. The ‘big bang’ start marked the transfer of resources –assets, personnel and finances- to the regions to compensate for the added authorities and functions. While the speed and size of the changes to formal structure have been phenomenal, the adjustment of non-formal institutional settings is likely to take a long time. Many conceptual and practical problems remain and the path to reform is continuously driven by an evolutionary change in the practices as well as in the perception and expectation of decentralization. Drawing from SMERU field research, this paper highlights the dynamics of the implementation of decentralization reform at the local level and some related issues and concerns. Although this reform is still in the preliminary stages, the findings of these studies show how the reform process has influenced the evolution of governance at the local level. In addition to the general findings, special attention is devoted to the problems of budget allocation, community participation and intergovernmental coordination faced by two resource-poor regions –West Lombok and Bandar Lampung (City)– in relation to the provision of public services. Although the progress at the local level might have been overshadowed by many problems, any progress certainly needs to be acknowledged to allow local governance to strengthen.
    Keywords: Decentralization, decentralisation, Indonesia, local governance, reform
    Date: 2003–06
  29. By: S. Brock Blomberg (Claremont McKenna College); Gregory D. Hess (Claremont McKenna College); Athanasios Orphanides (Division of Monetary Affairs)
    Abstract: We perform an empirical investigation of the macroeconomic consequences of international terrorism and interactions with alternative forms of collective violence. Our analysis is based on a rich unbalanced panal data set with annual observations on 177 countries from 1968 to 2000, which brings together information from the Penn World Table dataset, the ITERATE dataset for terroist events, and dataset of external and internal conflict. We explore these data with cross-sectional and panal groth regression analysis and a structural VAR model. We find that, on average, the incidence of terrorism may have an economically significant negative effect on growth, albeit one that is considerably smaller and less persistant that that associated with either external wars or internal conflict. As well, terrorism is associated with a redirection or economic activity away from investment spending and towards government spending. However, our investigation also suggests important differences both regardng the incidence and the economic consequences of terrorism among different sets of countries. In OECD economies, in particular, terrorist incidents are considerably more frequent than in other nations, but the negative influence of these incidents on growth is smaller.
    Keywords: Growth, Conflict, Terrorism, International terrorism, collective violence, macroeconomic consequences
    JEL: E6 H1 H5 D74 O11
    Date: 2004–01
  30. By: Chae-Shick Chung (Korea Institute for International Economic Policy); Doo Yong Yang (Korea Institute for International Economic Policy)
    Abstract: This paper is to analyze characteristics of the foreign exchange market in four major East Asian countries (Korea, Thailand, Singapore and Japan) before and after the financial crisis to get implicatoins of it. Our focus is given on the relationship between exchange rate volatilities and risk premium on the selected countries. The crisis-hit countries in the region including Korean and Thailand show structural break during the Asian crisis in representing higher standard deviations on nominal exchange rates since 1997. However, it is argued that they returned to the previous rigid exchange movements due to a fear of floating. Nevertheless, it is believed that the exchange rate arrangements in crisis-hit countries differ from the previous psedo-dollar pegged system.
    Keywords: Exchange rate volatility, risk premium foreign exchange, market in East Asia, financial crisis, foreign exchange rate, Korea, Thailand, Singapore, Japan
    JEL: F31 G12
    Date: 2004–10
  31. By: Yose Rizal Damuri (Department of Economics, Centre for Strategic and International Studies); Ari A. Perdana (Department of Economics, Centre for Strategic and International Studies)
    Abstract: The paper seeks to quantitatively measure the impact of fiscal policy on income distribution and poverty in Indonesia using WAYANG, the CGE model for Indonesian economy. We find that scenarios for fiscal expansion significantly influence income distribution and poverty. Fiscal expansion mainly benefits urban households and non-labour rural households – basically, the wealthiest segments of the society. We have are several explanations. First, factors of production owned by these segments allowed them to reap the most benefits from fiscal expansions. Second, these households are least affected by price increases due to their consumption structure. Finally, we find that, in real terms, the Indonesia’s taxation system burdens poorer households more than richer ones.
    Keywords: Indonesia, income distribution, poverty, economic modelling, fiscal policy
    Date: 2003–05
  32. By: Tubagus Feridhanusetyawan (Department of Economics, Centre for Strategic and International Studies); Yose Rizal Damuri (Department of Economics, Centre for Strategic and International Studies)
    Abstract: This paper uses simulations based on a GTAP model to reproduce the economic crisis in Southeast Asia, and in particular in Indonesia. The model is a static-real sector model, so the focus of the simulation is on the declining investment and the declining prices of non-traded goods during the crisis. The simulation is conducted by creating an exogenous shock on risk premium in Indonesia, Thailand and Malaysia, which leads to smaller allocation of regional investment in these countries, lower stock of capital goods, and lower production. The second shock, which is the declining price of land and natural resource, opens the possibility of resource allocation between sectors in the economy. The results of the crisis simulation show that the declining overall GDP during the crisis is accompanied by declining productions of capital and labor-intensive commodities, and expansion of natural resource and land based sectors. Based on the simulation, the economic crisis is expected to lower production of forestry and forestry related manufacturing sectors, mainly because these sectors are more capital or labor intensive, rather than land or natural resource intensive. Consistent with the modeling exercise, the output of these sectors also declined in reality during the worst time of the crisis in 1997-99. The simulation results also show that the negative impact of the crisis on welfare, measured as the changes in equivalent variation, is serious. The second simulation in this study measures the impact of trade liberalization on the economy after the crisis. The results show that the potential benefit from trade liberalization is large, and larger than the welfare lost during the crisis. In other words, pursuing more progressive trade liberalization would speed up the economic recovery after the crisis by creating more opportunity to get the most benefit from the global economy.
    Keywords: Southeast Asia, Indonesia, Asian crisis, forestry sector, computable general equilibrium (CGE)
    Date: 2004–02
  33. By: Tubagus Feridhanusetyawan (Department of Economics, Centre for Strategic and International Studies); Mari Pangestu (Department of Economics, Centre for Strategic and International Studies)
    Abstract: This paper presents an illustrative analysis of the crisis from a macroeconomic perspective, by focusing on the various economic adjustments both in the real and monetary sectors. It argues that the complex nature of the political and economic reform process has resulted in sub – optimal growth rates. The paper discusses, first, the evolution of the crisis. Then it provides an account of the developments in the real sector and growth in general. The authors then present monetary adjustments, including inflation, exchange rate, and other issues related to the banking and financial sectors. The fourth section discusses the balance of payment trends, by focusing more on the adjustments of exports and imports. This is followed by a discussion on debt issues and fiscal sustainability, while the last part concludes with the prospect of achieving macroeconomic stability.
    Keywords: Indonesia, crisis, macroeconomic adjustment
    Date: 2004–02
  34. By: Hyungdo Ahn (Korea Institute for International Economic Policy); Sunghyun H. Kim (Department of Economics, Tufts University)
    Abstract: A small open economy such as Korea is vunerable to outside shocks, in particular, would inetrest rate shocks, exchange rate shocks (or the terms of trade shocks), and foreign productivity shocks. Many researchers have empirically analyzed the effects of these shocks on macroeconomic variables using various time series estimation methods including the VAR. However, there has been an increasing demand for an analysis based on a simulation method using dynamic stochastic general equilibirum (DSGE) models, because the empirical estimation can only provide ad-hoc economic interpretations of the results. We construct a fully expanded DSGE model for a small open economy and calibrate the model to match the model characteristics to those observed in the Korean data. We explicitly model the non-traded sector of the economy. We focus on the dynamic effects of external shocks.
    Keywords: Busniess cycle models, external shocks, Korea
    Date: 2003–06
  35. By: Sungil Bae (Korea Institute for International Economic Policy); Tae Hwan Yoo (Korea Institute for International Economic Policy)
    Abstract: This paper explores the multimational activities of the Japanese automobile industry by focusing on the vertical production structure of a firm. The main objective is to analyze the effects of horizontal multinational activities on vertical multinational activities. First, we construct a theoretical model to predict whether an increase in horizontal multinational activity leads to an increase in already exisiting vertical multinational activity. This result mainly comes from the increased flow of intermediate products. Second, by applying annual data for the Japanese automobile industry from 1982 to 1997, we estimate equations based on a theoretical model. The estimated resuls provide a complementary relationship between horizontal and vertical multinational activities, thereby supporting the results of the theoretical model.
    Keywords: Foreign direct investment, Horizontal multinational activity, Vertical multinational activity, Intra-industry trade, Mulitnational activities, vertical production structure, Japanese automobile industry
    JEL: F21 F23
    Date: 2004–05
  36. By: Sung Jin Kang (Korea Institute for International Economic Policy); Hong Sik Lee (Korea Institute for International Economic Policy)
    Abstract: By using aggregate and firm level data of Korean and Japanese foreign affiliates in China ,we investigate the recent FDI trends and the determinants of location choice. The comparison of the FDI trends of Japanese and Korean companies show that Korean companies are concentrated into China, especially in three regions of northeast of China. The conditional logit estimation results differ between Korean and Japanese companies. Even though agglomeration variable is shown to be positive and significant for two countries, regional income is shown to be positive for Japan but negative for Korea. For Korean companies, the college graduate, the railway variables and trade share are shown to be positive and significant but other variables such as the number of economic zones and the share of production by government-owned companies to total regional production are shown to be negative. In addition, the distance form Korea and the ethnicity factor might play more significant roles in FDI decisions as well. Thus, we can interpret that the main determinants such as agglomeration, vertical, horizontal FDI and infrastructural variables play significant roles in explaining recent FDI location. However, explanatory power of those variables above for location decision of Japanese companies is not significant.
    Keywords: multinational companies, China, Korean companies, Japanese companies, FDI
    JEL: F11 F12
    Date: 2004–01
  37. By: Raymond Atje (Department of Economics, Centre for Strategic and International Studies); Kurnya Roesad (Department of Economics, Centre for Strategic and International Studies)
    Abstract: The existing economic incentive regime was one main factor behind high deforestation rates in Indonesia. Government intervention to push for the expansion wood processing industries resulted in unsustainable resource use patterns. Uncertain tenurial arrangements and property rights, unenforceable contractual obligations and weak monitoring and enforcement by the government exacerbated the situation. Indonesia’s existing forest management system does not provide efficient structures of control rights to any of the sector’s many stakeholders. The lack of well-defined property rights has prevented various stakeholders from trading their control rights so as to improve the efficiency of the management. Future economic research on forestry issues in Indonesia could therefore highlight the importance of secure property and ownership rights in any strategies to implement sustainable forestry management.
    Keywords: Indonesia, forestry management, property rights, incentive design
    Date: 2004–02
  38. By: Erwidodo (Center for Agro Socioeconomic Research); Satria Astana (Center for Socioeconomic Research on Foresty, Ministry of Forestry, Indonesia)
    Abstract: There are at least two problems left unsolved that calls for our attention, namely: (i) millions of hectare of logged over areas and most of them are degraded and others are underutilized and left unproductive, and (ii) high supply-demand gap of logs, due to a huge excess demand for logs and pulpwood. Industrial timber and estate crop plantations are considered to be the alternative way out towards reaching sustainable natural forest management. Evidence suggests that many logging companies are in fact more interested on clear-cutting timber than truly establishing the plantation. The main reason has been the need to get cheap timber for fulfilling an excess demand for pulpwood by pulp and paper industries. Many logging companies who also own estate crop plantations apply for a license to establish (timber or estate crop) plantation in the conversion area, clear the forest for logs and pulpwood, and eventually abandon the cleared land The paper presents a historical perspective of agricultural development in Indonesia, focusing on food and cash crop developments particularly in the outer islands of Indonesia. The authors explore agricultural-forestry linkage is highlighted in section present a discussion on further development of industrial timber and estate crop plantation as logical ways towards sustainable forest management in the future.
    Keywords: Indonesia, forestry, agriculture, timber, estate crop, sustainable forestry
    Date: 2004–02
  39. By: Arya B. Gaduh (Department of Economics, Centre for Strategic and International Studies); Kurnya Roesad (Department of Economics, Centre for Strategic and International Studies)
    Abstract: For most of the 1980s and 1990s, Indonesia’s forest industry was characterized by protectionist policies. The combination of a log-export ban and the enforcement of artificially low prices of logs by APKINDO had fostered the inefficient domestic wood-panel producers, while potentially killed off more efficient wood-panel producers abroad. The removal of APKINDO and the log export ban, as major parts of the IMF – led economic reform agenda since 1998 was expected to improve allocative efficiency in the wood – processing sector. However, the removal of these policies likely increased pressure on Indonesia’s forests. An artificially low price of logs reduces their supply, and henceforth, relieves pressures off forests. Taking away the ban gradually moves the prices back to the international level, hence increasing the rate of wood extraction. As such, absent other forms of intervention, we face a trade-off between economic efficiency and environmental sustainability of the log export ban policy. This paper is an attempt to describe, and quantify when possible, this trade-off empirically. It asks whether the log export ban has encouraged less efficient use of domestic logs and whether it has helped to reduce the rate of round wood extraction. The empirical study suggests that the former did occur during the LEB and APKINDO regime of 1985-1997, while the latter cannot be shown empirically.
    Keywords: Indonesia, log ban, crisis, adjustment, forestry sector.
    Date: 2004–02
  40. By: Choong Young Anh (asKorea Institute for International Economic Policy); Doo Yong Yang (Korea Institute for International Economic Policy)
    Abstract: This paper has two purposes: First, we briefly review the corporate sector in Korea to gain an understanding of how corporate sector reforms have evoloved and developed; Second we evaluate the rehabiliatation measures for corporate restructuring from firm-level data. Based on these analyses, the papar attempts to draw lessons from the Korean experience for other Asian countries facing similar corporate sector problems.
    Keywords: Corporate restructuring, Korea
    Date: 2003–12
  41. By: John Bryant
    Abstract: This paper considers three groups of children affected by international migration: (i) children left behind by international labour migrants from the Philippines, Indonesia, and Thailand; (ii) children of Thai nationals in Japan; and (iii) children brought along by irregular migrants in Malaysia and Thailand. Based on the limited data available from published sources, the paper constructs preliminary estimates of numbers of children involved. It then synthesizes available evidence on problems and opportunities faced by the children, and on policies towards them. [...more]
    Keywords: Child Poverty; Migration; Social Policies;; Cambodia; Indonesia; Malaysia; Myanmar; Philippines; Thailand;
    JEL: F22
    Date: 2005
  42. By: Seonghoon Cho (Korea Development Institute); Antonio Moreno (School of Economics and Business Administration, University of Navarra); Geert Bekaert (Columbia Business School, Columbia University)
    Abstract: This article complements the structural New-Keynesian macro framework with a no-arbitrage affine term structure model. Whereas our methodology is general, we focus on an extended macro-model with an unobservable time varying inflation target and the natural rate of output which are filtered from macro and term structure data. We obtain large and significant estimates of the Phillips curve and real interest rate response parameters. Our model also delivers strong contemporaneous responses of the entire term structure to various macroeconomic shocks. The inflation target dominates the variation in the “level factor” whereas the monetary policy shocks dominate the variation in the “slope and curvature factors”.
    JEL: E31 E32 E43 E52 G12
    Date: 2005–04
  43. By: Ling Sun (Providence University); Lilyan E. Fulginiti (University of Nebraska); E. Wesley Peterson (University of Nebraska)
    Abstract: In this paper we propose an empirical model to decompose the evolution of the agricultural GDP share of Taiwan into three components: price changes, factor endowment changes and technological change. The full sample period is 1967 to 1997. The data were first tested to assess whether the time series are nonstationary and cointegrated. After confirming their nonstationarity and cointegrated relation- ship, we then employ an error correction model (ECM) in the empirical estimation to capture the dynamic as well as long-run equilibrium relationship among those economic variables. The results suggest that relative prices have a positive influence on the share of agriculture in GDP in both the long-run and the short-run. An increase in capital per unit of labor, on the other hand, is associated with a smaller agricultural share. This result is consistent with the Rybczynski Theorem. Technical change has been biased in favor of this sector. The strong negative impact of the change in factor endowments seems to dominate any possible positive effect of relative prices and technical change. This result makes a strong case for a Heckscher-Ohlin type model as a basis of understanding the development of the Taiwanese economy.
    Keywords: Taiwan, productivity growth, GDP function, error correction,
    JEL: O4 Q1
    Date: 2005–02–28
  44. By: Xiang Ao (University of Nebraska); Lilyan E. Fulginiti (University of Nebraska)
    Abstract: Young (1995) estimated Total Factor Productivity (TFP) growth for Hong Kong, Taiwan, Singapore and South Korea. He reported moderate growth rates for these four regions. This means that rapid growth of GDP in these four economies is due mainly to fast increase of inputs. Young (2000) also estimated the TFP growth rate of China to be 1.4% per year during the period of 1978 to 1998. Similar to his claim for the four 'Asian Tigers', he concluded that 'the productivity performance of the non-agricultural economy (of China) during the reform period is respectable, but not outstanding.' China's real GDP grew at about 9% every year during that period. Is this extraordinary growth rate only due to factor accumulation? Or is it to a large degree due to improved efficiency and innovations? To answer this question, this study uses a panel dataset of real GDP, capital stock, and labor force for 30 provinces for 1978 to 1998 to estimate the TFP for the Chinese economy. Two approaches are used to estimate the aggregate production technology: a fixed-effects model and a stochastic frontier model. Our results are consistent across models indicating a TFP growth rate of 4.9% and 3.3% respectively. Both estimates are higher than Young's 1.9%. Our estimates also indicate that national average of TFP's contribution to GDP growth amount to 41.3% and 38.7%, respectively. Other results of interest indicate that capital has contributed more than labor to GDP growth and that technological change has been labor using.
    Keywords: Productivity growth, China, provinces, stochastic frontier, TFP, technical change, efficiency change
    JEL: O47 O53
    Date: 2005–02–28
  45. By: Lilyan E. Fulginiti (University of Nebraska); Richard K. Perrin (University of Nebraska)
    Abstract: This paper examines changes in agricultural productivity in18 developing countries over the period 1961-1985. We use the nonparametric, output- based Mamquist index to examine whether the results from such approach confirm results from other methods that have indicated declining agricultural productivity in less developed countries.
    Keywords: Journal of Development Economics, vol. 53 (1997), 373-390
    JEL: O4 Q1
    Date: 2005–02–28
  46. By: Rafal Weron (Hugo Steinhaus Center)
    Abstract: In this paper we propose a jump diffusion type model which recovers the main characteristics of electricity spot price dynamics, including seasonality, mean reversion, and spiky behavior. Calibration of the market price of risk allows for pricing of Asian-type options written on the spot electricity price traded at Nord Pool. The usefulness of the approach is confirmed by out-of-sample tests.
    Keywords: Power market, Electricity price modeling, Asian option, Market price of risk, Derivatives pricing
    JEL: C51 G13 L94 Q40
    Date: 2005–02–07
  47. By: Marco Cipriani (George Washington University); Antonio Guarino (UCL)
    Abstract: We study herd behavior in a laboratory Þnancial market where a sequence of subjects trades an asset whose value is unknown. In two treatments the price is updated according to a deterministic rule based on the order ßow, and in another it is updated by experimental participants. Theory predicts that agents should never herd. Our experimental results are in line with this prediction. Nevertheless, we observe a phenomenon that cannot be accounted for by the theory. In some cases, subjects decide not to use their private information and choose not to trade. In other cases, they ignore their private information to trade against the market (contrarian behavior). (JEL C92, D8, G14)
    JEL: C92 D8 G14
    Date: 2005–02–17
  48. By: Cornelis A. Los (Kent State University)
    Abstract: This paper discusses various ways of measuring the persistence or Long Memory (LM) of financial market risk in both its time and frequency domains. For the measurement of the risk, irregularity or 'randomness' of these series, we can compute a set of critical Lipschitz - Hölder exponents, in particular, the Hurst Exponent and the Lévy Stability Alpha, and relate them to the Mandelbrot-Hoskings' fractional difference operators, as occur in the Fractional Brownian Motion model (which is our benchmark). The main contribution of this paper is to provide a compaison table of the various critical exponents available in various scientific disciplines to measure the LM persistence of time seies. It also discusses why Markov- and (G)ARCH models cannot capture this LM, long term dependence or risk persistence, because these models have finite lag lengths, while the empirically observed long memory risk phenomenon is an infinite lag length phenomenon. Currently, there are three techniques of nonstationary time series analysis to measure time - varying financial risk: Range/Scale analysis, windowed Fourier analysis, and wavelet MRA. This paper relates these powerful analytic techniques to classical Box-Jenkins-type time series analysis and to Pearson's spectral frequency analysis, which both rely on the uncorroboated assumption of stationarity and ergodicity.
    Keywords: Persistence, long memory, dependence, time series, frequency, critical exponents, fractional Brownian motion, (G)ARCH, risk measurement
    JEL: C15 C23 C53 G10
    Date: 2005–02–13
  49. By: Kirby Adam J.R. Faciane (Kirby Faciane / KAJR Faciane)
    Abstract: Over the past two decades, many economists believe that financial changes have greatly benefited society. Others argue that welfare gains have been a mixed blessing; a minority would probably go so far as to say that costs have outweighed their benefits. There is naturally no satisfactory resolution to this debate, considering the complexity of the issues as well as the judgmental nature of benefit and cost calculations. A look at the presumed positive effects and difficulties might be helpful in providing a perspective on the debate.
    Keywords: financial evolution, assessment
    JEL: G G0 G00
    Date: 2005–03–18
  50. By: Erlangga Agustino Landiyanto (Faculty of Economics, Airlangga University); Wirya Wardaya (Faculty of Economics, Airlangga University)
    Abstract: This paper analyses growth and convergence on sugarcane industry in southeast Asia countries. Important questions in this paper are whether the growth of sugar cane industry in Southeast Asia moves toward a convergence or divergence trend over time and to what extent the economic integration influences the development and policy of those countries. This paper is a cross-country study and employs GLS techniques. Some countries involved in the analysis are Indonesia, Malaysia, Thailand, Cambodia, Laos, Myanmar, The Philippines, and Vietnam. The finding suggests that based on ƒÒ convergence approach, both basic variable and equation with dummy indicate that these variables could explain the convergence and speed of convergence within the industry. Furthermore, The regression results also strengthen the finding of £m - convergence.
    Keywords: Convergence, Growth, Sugarcane.
    JEL: R C6 D5 D9
    Date: 2005–01–31
  51. By: K. Ali Akkemik (Nagoya University Graduate School of International Development)
    Abstract: This paper examines the impact of structural change on productivity through a decomposition of aggregate manufacturing productivity growth in Korea, Singapore, and Japan over the period 1970-2000. First, the shift-share analysis is utilized to measure the impact of the allocation of labor among manufacturing industries on aggregate labor productivity. Next, the impact of the allocation of labor and capital on total factor productivity (TFP) growth is analyzed. The findings show weak support for the positive impact on aggregate productivity of reallocation of factor inputs for Japan and Korea, and a positive impact for Singapore.
    Keywords: productivity shift-share analysis East Asia resource allocation
    JEL: C6 D5 D9
    Date: 2005–04–03
  52. By: Martin Melecky (School of Economics, University of New South Wales)
    Abstract: An attempt to quantify possible negative effects of external crises in emerging market economies is made in this paper. The direct and indirect effects of the external crises, here sudden stops in capital flows and currency crises, are estimated and compounded into composite overall effects. In addition, an alternative approach for the analysis of the dynamics is introduced. I find that a current account reversal has a negative effect, both direct and indirect, on economic growth introducing a slowdown exceeding two percentage points in the current year. On the other hand, the direct effect of currency crises is insignificant and unlike in the case of the reversal the indirect effect dominates and delivers a negative overall effect of 1.8 percentage points. The time necessary for the adjustment of actual growth back to its equilibrium rate is roughly 1.8 years after the current account reversal and 1.6 years after the currency crisis. The corresponding cumulative losses are four and 3.3 percentage points for the reversal and the currency crisis, respectively.
    Keywords: External Crises, Economic Growth, Emerging Market Economies, Panel Data.
    JEL: C23 F32 O40 O52
    Date: 2005–02–04
  53. By: Gunther Schnabl (Tuebingen University); Christian Danne (Tuebingen University)
    Abstract: This paper studies the role of the yen/dollar exchange rate in the Bank of Japan’s monetary policy reaction function. In contrast to prior estimations of reaction functions based on the Taylor-rule, we allow for regime shifts by estimating rolling coefficients from January 1974 to March 1999. The results show a temporary impact of the exchange rate on monetary policy around 1978/79 and a persistently increasing impact of the yen/dollar exchange rate after 1986. The ris ing importance of the yen/dollar exchange rate for Japanese monetary policy is in line with increasing efforts to stabilize the yen/dollar exchange rate by foreign exchange intervention after March 1999, when the nominal interest rate reached the zero boundary.
    Keywords: Japan, Monetary Policy Reaction Function, Bank of Japan, Interest Rate Rules, Exchange Rates, Taylor Rule, GMM.
    JEL: E43 E52 E58 F41
    Date: 2005–03–04
  54. By: Norihiro KASUGA (Nagasaki University); Akio Torii (Yokohama National University)
    Abstract: In this paper, we have empirically analyzed the factors that lead to longer business relationships in the logistics industry. The main conclusions of this paper are summarized as follows. First, the terms of relationships observed between the consignors and the trucking carriers that receive consignment of the transportation of the consignor’s main products have significantly positive associations with the level of information exchanged and consignments of distribution processing operations proposed by the consignee. Transaction cost economics implies that long-term relationships facilitate investment in relation-specific assets so as to improve efficiency. Then, we have sound reason to assume that the content of the shared information and the equipment for distribution processing have a significantly relation-specific nature, and accumulation of the related human capital, such as skill in workers and know-how, is important to improve efficiency of the whole logistics system. At the same time, these assets may function as hostages to maintain the long-term relationships. In regard to all of these points, the same mechanism is at work as in the commercial distribution market. The second conclusion is that the long-term business relationship is affected by the demand volatility of the consignor’s product. Consignors who belong to industries with a large volatility of demand tend to rely on transportation services procured from spot logistics markets with a shorter contract term. This finding is also consistent with previous research in the commercial distribution market. These results suggest that the mechanism to minimize transaction costs by establishing long- term business relationships is likely to exist in the logistics market. This is the same mechanism which is pointed out in the commercial distribution market. Generally, assets consisting of a system with a network structure tend to be sunken. Therefore, in order to save coordination costs which are incurred to make the whole distribution market function efficiently, long-term business relationships are indispensable. Thus, relationships between companies in the logistics market are likely to be affected by the shortening of the delivery time in the commercial distribution market.
    Keywords: transaction cost, logistics, Japanese system, long-term relationship
    JEL: L
    Date: 2005–04–08
  55. By: J. Michael Finger (Vernon Taylor Professor of Economics, Trinity University); Julio J. Nogués (Universidad Di Tella)
    Abstract: The Uruguay Round involved a grand North-South bargain: The North reduced import barriers, particularly in textiles and agriculture. The South adopted new domestic regulations in such areas as services and intellectual property—changes that would lead to increased purchases from the North. In mercantilist economics, apples for apples—imports for imports. In real economics, apples for oranges. Finger and Nogués argue that while the North’s reduction of import barriers benefits both the North and the South, the new domestic regulations adopted by countries of the South could prove costly to those countries. To begin with, the regulations will be expensive to implement. And while the cost side of their impact is secured by a legal obligation (in the case of intellectual property rights, for example, the cost is higher prices for patented goods), the benefits side is not so secured.
    Keywords: Uruguay Round, Services negotiations, Doha Round reciprocity
    JEL: F1 F2
    Date: 2005–02–09
  56. By: Julio J. Nogues (Universidad Di Tella)
    Abstract: The results of the Uruguay Round, show that the concessions given by developing countries were generally more valuable than those they received from industrial countries. I suggest that this outcome is explained by aggressive demands from industrial countries, and by the lack of resources at the disposal of developing countries. These and other “structural factors”, weaken the negotiating capacity of developing countries and the outcome of their bargaining, is likely to be an “unequal exchange of concessions”. The paper discussess the costs of these exchanges, and the structural factors that help to understand the processes leading to these outcomes.
    Keywords: Uruguay Round, Multilateral Negotiations, Developing countries, Unbalanced reciprocity
    JEL: F1 F2
    Date: 2005–02–09
  57. By: Branko Milanovic (Carnegie Endowment/World Bank); Lyn Squire (Global Development Network)
    Abstract: The objective of the paper is to answer an often-asked question : if tariff rates are reduced, what will happen to wage inequality ? We consider two types of wage inequality : between occupations (skills premium), and between industries. We use two large data bases of wage inequality that have become recently available and a large dataset of average tariff rates all covering the period between 1980 and 2000. We find that tariff reduction is associated with higher inter-occupational and inter-industry inequality in poorer countries (those below the world median income) and the reverse in richer countries. The results for inter-occupational inequality though must be treated with caution.
    Keywords: tariffs, trade, liberalization, wages, inequality
    JEL: F1 F13 D31 J31
    Date: 2005–02–11
  58. By: Kaiji Chen (University of Southern California); Ayse Imrohoroglu (University of Southern California); Selo Imrohoroglu (University of Southern California)
    Abstract: Japanese and U.S. saving rates have been significantly different over the last forty years. Can a standard growth model explain this difference? The answer is yes. Our results indicate that both an infinite horizon, complete markets setup and an overlapping generations model with incomplete markets are about equally able to generate saving rates that are remarkably similar to the data during 1961-1998. Our quantitative findings identify changes in the growth rate of total factor productivity and the low initial capital stock as the main factors generating the time series behavior of the net national saving rate in Japan. We show that if the Japanese had faced the U.S. TFP and initial conditions, their saving rate would have looked very similar to that of the U.S. households. In other words, it seems that there is nothing peculiar about the Japanese saving behavior.
    Keywords: Neoclassical Growth Model, Saving Behavior, Total Factor Productivity
    JEL: E
    Date: 2005–02–07
  59. By: Sebastian Dullien (Financial Times Deutschland)
    Abstract: This paper argues that the tradtitional way of gauging a country's fiscal policy stance by looking at government budget deficit or cyclically adjusted budget deficits is misleading in the case of China, since a lot of what usually would be considered fiscal policy is conducted via investment by state owned enterprises. The paper therefore proposes a different indicator for the fiscal policy stance, constructed from government consumption, government expenditure, the state-owned- enterprises' investments and tax revenue. Using this indicator, it can be shown that fiscal policy has been strongly counter-cyclical in China over the past two decades.
    Keywords: Fiscal Policy, China, State-Owned Enterprises, Statistics
    JEL: E62
    Date: 2005–02–28
  60. By: Ahmad Zubaidi Baharumshah (Universiti Putra Malaysia); Evan Lau (Universiti Malaysia Sarawak)
    Abstract: In the aftermath of the 1997 Asian financial crisis, fiscal policy is playing a bigger role in smoothing the business cycle and getting the crisis-affected countries back on their growth paths. The main purpose of this paper is to assess empirically the fiscal policy regimes in five Asian countries using a formal framework based on the government’s intertemporal budget constraints (GIBC). For this purpose, we relied on an array of time-series methods and quarterly frequency data of nearly three decades that ended in 2003:Q2. Our conclusions are; first, the evidence indicates that the fiscal stance in Thailand and Korea are on their sustainable path while the Philippines and Malaysia satisfy only the necessary condition for sustainability. Second, we found that revenues are growing at a rate faster than government spending for Singapore, a country that have recorded large surpluses for most of the sample period. Third, the results show a one-way causation from expenditure to revenue for Korea, Singapore and Thailand. This finding indicates that reducing the size of government spending may improve fiscal budget deficits without having to undergo changes in the overall strategy. Fourth, we observed a long-run feedback causality in the revenue-expenditure nexus for the case of Malaysia and the Philippines, which may require fiscal synchronization instrument policies to moderate the post-crisis fiscal imbalances. Together, these results demonstrate the diverse fiscal patterns but they should be useful as a means of understanding the complexities of economic integration in the region.
    Keywords: fiscal sustainability, government intertemporal budget constraint, nonstationarity.
    JEL: E
    Date: 2005–04–01
  61. By: Evan Lau (UNIMAS); Ahmad Zubaidi Baharumshah (UPM)
    Abstract: Maintaining sustainable fiscal policy has been increasingly important in the scope of economists and the policy makers as the key requirement of macroeconomic stability and sustainability of an economy. Without exception, the issue of fiscal sustainability also being in the spotlight for the developing countries especially in Asian, after the financial shock in 1997. Motivated by this development, this paper test the mean-reverting behavior of fiscal position by adopting families of univariate and panel unit root tests for the panel of ten Asian countries. Univariate unit root tests indicates that the fiscal position follows a non-stationary process of I(1) while mean reverting property were detected when we adopt the commonly used panel unit roots techniques. By utilizing the series-specific panel unit root test developed by Breuer et al. (2002, SURADF) that allows one to test for the presence of non-stationarity within individual cross sectional of the panel, we found that four out of ten countries in the panel are stationary suggesting little evidence of fiscal sustainability in Asian. These results also confirm the complexity properties of the panel data.
    Keywords: fiscal policy, mean reversion, sustainability, government intertemporal budget constraint, unit root tests, Asian
    JEL: E
    Date: 2005–04–01
  62. By: Suparna Chakraborty (University of Minnesota & Federal Reserve Bank of Minneapolis)
    Abstract: This paper investigates the causes of business cycle fluctuations that Japan experienced over the period 1980 to 2000. To this end, I build a dynamic general equilibrium model with endogenous borrowing constraints where business cycle fluctuations are the result of TFP fluctuations and investment frictions. I identify land tax changes since 1984 as a possible source of investment frictions, the idea being that given a strong preference for debt-financing and widespread use of land as collateral in Japan, land tax changes will cause fluctuations in land price that can potentially affect output and investment by affecting borrowing capacity of firms. Calibrating the model using Japanese data and feeding in observed TFP and land taxes one by one and in unison, I find that TFP and land tax fluctuations can significantly account for observed fluctuations in output, but cannot account for land price fluctuations unless agents expect land tax changes to be permanent. I further identify redistribution of land holding between commercial and residential uses in response to land tax and TFP changes as an important channel through which the effect of these external fluctuations on output gets amplified. Observed data of land use in Japan provides evidence of such redistribution.
    Keywords: Real estate, borrowing constraint, business cycle, japan
    JEL: E
    Date: 2005–04–06
  63. By: Haizhi Tong (University of Nebraska); Lilyan E. Fulginiti (University of Nebraska)
    Abstract: A nonstochastic Malmquist Index and a stochastic frontier production function are estimated to examine agricultural productivity growth in Chinese provinces during the 1990’s. Results for both methods indicate high productivity growth in the mid 1990’s with a declining trend thereafter. While the Malmquist index picks up a reversal of this trend in 2000-2001, this is not evident in the stochastic frontier estimates. Both methods identify the same regions as the most productive. Variables representing public inputs such as education, research and infrastructure are shown to have an important impact on differential provincial performance.
    Keywords: Agricultural productivity growth, China, provinces, Malmquist index, stochastic frontier, research and infrastructure
    JEL: Q12 O47 O53
    Date: 2005–02–28
  64. By: Julien Reynaud (TEAM); Rofikoh Rokhim
    Abstract: Drawing together the concepts of inefficiency and banking crisis is directly inspired by business cycles theory where a crisis is the turning point from which the market/economy is recovering. If inefficiency plays a role in the occurrence of banking crisis, the post-crisis period should be the time for recovering efficiency. Moreover, traditional banking theory predicts that the crisis should eliminate bad banks from the system, leading to a more efficient banking sector. We tested this hypothesis on the 1994 Turkish and 1997 Indonesian banking crises using stochastic cost frontier analysis. Our results show an interesting pattern, opposed to what theory predicts : we find that inefficiency increase after the crises in both banking sectors.
    Keywords: Banking crisis, efficiency, Indonesia, Turkey.
    JEL: G14 G21 G28 G34
    Date: 2005–01
  65. By: Marie Godquin (TEAM); Manohar Sharma (IFPRI)
    Abstract: This paper provides a new approach to analyzing credit constraints by differentiating which of the household's production and consumption decisions are affected by credit constraints. It also provides a first attempt to estimate of the extent and determinants of credit constraints in the Philippines. Based on direct questions on households' experiences in credit markets, we estimate the percentage of credit-constrained households at 65%. The lack of credit constrained the level of agricultural production of 37% of the farming households; it also constrained the level of family business production of 31% of the households operating such businesses. Credit constraints also limited consumption choices of 21% of the sample households. We found that the presence of credit programs operating in the village and proximity to commercial banks and rural banks reduced the probability of credit constraints in production decisions. Further, some types of households are more likely to experience credit constraints. These are the households with little education, households that own little or no titled land and sugar-producing households.
    Keywords: Credit constraints, Philippines, Asia.
    JEL: O12 O16
    Date: 2005–01
  66. By: Rana Hasan (Asian Development Bank); Lan Chen (Graduate student, University of Hawaii-Manoa)
    Abstract: We combine labor force survey data with trade and production data to examine the impact of trade on wages and employment in the Philippines' manufacturing section. Our main finding are as follows. First, in contrast to findings typically reported for Latin American countries, our data indicate that wage inequality in the Philippines' manufacturing sector has declined over the period in which trade liberalization has been undertaken. This is despite the fact that reductions in tariff rates were largest in less skill intensive manufacturing industries. There has also been an absence of any secular rise in returns to higher education. Second, tariff reductions have been associated with declines in industry wage premiums in capital-intensive industries. Moreover, these declines appear to have been largest for skilled workers. Finally, tariff reductions have had an insignificant effect on both employment as well as the average hours of work of full-time employees across industries. These findings are consistent with a scenario where workers in capital-intensive industries, especially the more skilled ones, earned rents prior to trade liberalization; liberalization may have worked to erode these.
    Date: 2003–09
  67. By: Dieter Ernst (Economics Study Area, East-West Center)
    Abstract: This paper was prepared for the Democratic Pacific Assembly 2003 Conference, "Common Future of the 21st Century Pacific," September 18-21, 2003, in Taipei, Taiwan.
    Date: 2003–11
  68. By: Dieter Ernst (Economics Study Area, East-West Center); Boy Luethje (Institut fuer Sozialforschung, Universitaet Frankfurt, Germany)
    Abstract: This paper was prepared as an issue paper, to be discussed at the Planning Meeting of the SSRC on "Emerging Pathways to Innovation in Asia," September 12-13, 2003.
    Date: 2003–11
  69. By: Dieter Ernst (Economics Study Area, East-West Center)
    Abstract: This paper will appear in International Journal of Innovation Management, special issue in honor of Keith Pavitt, (Peter Augsdoerfer, Jonathan Sapsed, and James Utterback, guest editors), forthcoming...
    Date: 2003–11
  70. By: Dieter Ernst (Economics Study Area, East-West Center)
    Abstract: This paper was published in Oxford Development Studies special issue in honor of the late Professor Linsu Kim.
    Date: 2004–03
  71. By: Jaleel Ahmad (Economics, Massachusetts Institute of Technology, Montreal, Canada); Jing Yang (Economics, Concordia University, Ottawa, Canada)
    Abstract: This paper investigates whether a J-curve can be detected in the time series data on China's bilateral trade with the G-7 countries. It utilizes cointegration and causality tests to ascertain the long-run relatedness, and the short-run dynamics, between the real exchange rate, national income, and the trade balance. There is some evidence that a real depreciation eventually improves the trade balance with some countries. But there is no indication of a negative short-run response which characteristics the J-Curve.
    Date: 2004–03
  72. By: Dieter Ernst (Economics Study Area, East-West Center)
    Abstract: This paper will be published in Peter and J. Katzenstein and Takashi Shiraishi, eds. Remaking East Asia: Beyond Americanization and Japanization, Cornell University Press.
    Date: 2004–03
  73. By: Tianshu Chu; Thomas J. Prusa (Economics Study Area, East-West Center)
    Abstract: An earlier draft of this paper was presented at the APEC Capacity-Building Workshop on Quantification of NTMs and Trade Facilitation, October 8-10, 2003, in Bangkok, Thailand.
    Date: 2004–04
  74. By: James Mak (Department of Economics, University of Hawaii-Manoa); Lonny Carlile (Asian Studies, University of Hawaii-Manoa); Sally Dai (Research Program, East-West Center)
    Abstract: In this paper we forecast Japanese international travel to 2025. In addition, to the usual economic variables, our model also captured both populations again and cohort effects on Japanese travel abroad. We predict the number of future Japanese overseas trips for males and females separately by five-year age groups and in five-year increments. We conclude that the Japanese will continue to travel abroad in increasing numbers but population aging will dramatically slow overall future Japanese overseas travel. While the number of "senior" travelers is predicted to increase sharply, we foresee fewer overseas trips taken by Japanese, especially among women, in the 20s and early 30s age groups. Finally, we examine the responses of the industry and the public sector in Japan to implications of a rapidly aging population on future international travel.
    Date: 2004–10
  75. By: Can Huang; Celeste Amorim; Joaquim Borges Gouveia (Departamento de Economia, Gestão e Engenharia Industrial, Universidade de Aveiro); Mark Spinoglio; Augusto Medina (Sociedade Portuguesa de Inovação)
    Abstract: The paper first identifies the stakeholders involved in the design and implementation of China’s innovation policy and compares them with different government systems in selected Organization for Economic Co-operation and Development (OECD) countries. In order to disclose the relative strength and weaknesses inside China’s innovation policy framework, we proceed to utilize policy practices in the OECD countries as a guideline to examine China's innovation policy in five categories: reform in the public S&T institutions, financial policy, business innovation support structure, human resource policy and legislative actions. Subsequently, several weak components of the Chinese innovation policy framework are identified and two of them are selected for further analysis: education and human resource policy, and protection of Intellectual Property Rights (IPR). Finally, the paper provides some priorities and possible actions for future innovation policy developments in China.
    Date: 2004
  76. By: Tilak Abeysinghe (Department of Economics, National University of Singapore); Keen Meng Choy (Department of Economics, National University of Singapore)
    Abstract: This paper sheds further light on the debate spearheaded by Riedel (1988) on the specification of a small country export function. The theoretical and empirical analyses in the paper show that while the price-taker assumption cannot be rejected, the export function for Singapore should not be construed as a standard export supply equation. As argued by Kapur (1983) instead, it is an export function with both demand and supply factors playing a role. We arrived at the final model specification by taking into consideration changes in the import content of exports over time. The paper also provides a new methodology for deriving a quarterly series of manufacturing net capital stock.
    Keywords: price taker, demand constraint, export function, import content, restricted cointegrating space
    JEL: C32 F14 F41
  77. By: Ngee-Choon Chia (Department of Economics, National University of Singapore); Albert K C Tsui (Department of Economics, National University of Singapore)
    Abstract: While many studies have examined the cost-containment aspect of Medical savings accounts (MSA), few have investigated the adequacy of MSA to finance the health care expenditure. This paper estimates the present value of lifetime healthcare expenses (PVHE) of the Singaporean male and female elderly upon retirement at age 62. The estimation involves calibrating the stream of future healthcare expenditure; stochastic forecasting of cohort survival probabilities; and discounting the projected lifetime healthcare expenditure. Estimated values of the PVHE under various scenarios are used to assess the adequacy of the government-decreed minimum saving to be maintained in the MSA.
    Keywords: medical savings accounts, present value of lifetime health care expense, cohort survival probabilities
    JEL: G00 H51 I18 J11 J14
  78. By: Ngee-Choon Chia (Department of Economics, National University of Singapore); Albert K C Tsui (Department of Economics, National University of Singapore)
    Abstract: The unique way of financing housing through the mandatory savings system in Singapore has created a class of “asset-rich and cash-poor” Singaporeans. This paper provides a framework to assess the viability of a reverse mortgage (RM) market so that such instruments may be harnessed as a source of financing retirement income for home owners. Based on different cost of capital, we estimate the probability of loss for both the private supplier and public provider of RMs. The probability of loss is computed by three major components: choice of replacement ratio and property growth rate; forecast of cohort survival probability by joint-life; and generation of yield curves to discount the future cash flows. The stochastic forecast of survival probability is estimated using the Lee-Carter demographic model based on the abridged life tables. The discount factor for future cash flows are generated from stochastic interest rates. Our simulation results indicate that based on the benchmark scenario, RM instruments by private providers are likely to achieve about 50% replacement ratio for the 4-room public housing owners. However, the market may be missing if a replacement ratio of 70% is required.
    Keywords: incomplete reverse mortgage market, replacement ratio, probability of loss, risk free interest, breakeven annuity
  79. By: Euston Quah (Department of Economics, National University of Singapore)
    Abstract: This paper focusses narrowly on three areas of public policy concerning the environment deemed necessary for sustainable economic growth. It has relevance to Asian nations as they continue to demand for higher growth and at the same time keeping environmental degradation in check. The three areas are: (1) the issue of siting environmentally unfriendly but nationally required facilities, otherwise known as the NIMBY syndrome, (2) the waste generation problem, and (3) the need to price green goods. In addition to the above three areas for public policy, the paper also discusses a number of pragmatic principles for use in environmental management. Such things as cost-benefit analysis and project appraisal; the pursuit of clean and advanced technologies and inherent conflicts; exploring market solutions; understanding multiple stakeholders; and last but not least the need to establish data baselines for environmental quantity and quality.
  80. By: S.M. Thangavelu (Department of Economics, National University of Singapore); Toh Mun Heng (Department of Business Policy, National University of Singapore)
    Abstract: The World Trade Organisation’s 2004 Trade Policy Review of Singapore (WTO-TPR Singapore 2004) depicts the small and outward-oriented economy as one of the most open country to international trade and investment. The review highlights the benefits of the outward-oriented strategy that has enabled the Singapore economy to weather recent external shocks such as the Asian financial crisis to the SARS and to the recent unfavourable conditions in the Middle East. In particular, the report commended Singapore’s efforts on its liberalization of the services sector and its economic benefits to consumers and global trade. However, the WTO-TPR Singapore 2004 highlights several key areas of concerns: (a) the commitment to multilateral agreements with the rising number of bilateral free trade agreements signed by Singapore and (b) the lack of growth of total factor productivity, a key indicator for long-run efficiency of the economy. The paper addresses the above key concerns raised in the WTO’s TPR of Singapore in terms of its commitment to global trade in terms of WTO-plus bilateral FTAs, which intends to support multilateral trading system, and its overall industrial strategies to raise its competitiveness.

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