nep-sea New Economics Papers
on South East Asia
Issue of 2005‒05‒14
fifteen papers chosen by
Kavita Iyengar
Asian Development Bank

  2. Pass-Through of Exchange Rate Changes and Macroeconomic Shocks to Domestic Inflation in East Asian Countries By Takatoshi Ito; Yuri N. Sasaki; Kiyotaka Sato
  3. Implications of Product Patents : Lessons from Japan By Reiko Aoki; Tomoko Saiki
  4. Do Non-Profit Operators Provide Higher Quality of Care? Evidence from Micro-Level Data for Japan's Long-term Care Industry By Haruko Noguchi; Satoshi Shimizutani
  5. Non-Market Values and Intra-Household Gender Gap in Healthcare: The Case of Rural China By Mengtao Gao; Yang Yao
  6. Regional vs. Global Risk Sharing in East Asia By Soyuong Kim; Sunghyun H. Kim; Yunjong Wang
  7. Impacts of Exchange Rates on Employment in Three Asian Countries: Korea, Malaysia, and the Philippines By Wanjoong Kim; Terrence Kinal
  8. Technological Specialization and Convergence of Small Countries: The Case of the Late-industrializing Asian NIEs By Poh-Kam Wong; Annette Singh
  9. How Ownership Structure Affects Capital Structure and Firm Performance? Recent Evidence from East Asia By Nigel Driffield; Vidya Mahambare; Sarmistha Pal
  10. Dynamic Adjustment of Corporate Leverage: Is there a lesson to learn from the Recent Asian Crisis? By Nigel Driffield; Vidya Mahambare; Sarmistha Pal
  11. 'Once-in-a-Generation' Yen Volatility in 1998: Fundamentals, Intervention, and Order Flow By Jun Cai; Yan-Leung Cheung; Raymond Lee; Michael Melvin
  12. The Political Economy of Japan's Big Bang By Takatoshi Ito; Michael Melvin
  13. A Yen is not a Yen: TIBOR/LIBOR and the determinants of the 'Japan Premium' By Michael Melvin; Vincentiu Covrig; Buen Low
  14. Changes in Russia's gas exportation strategy: Europe versus Asia ? By Catherine Locatelli
  15. The Japanese Deflation: Has It Had Real Effects? Could It Have Been Avoided? By Claudio Morana

    Abstract: Este artículo presenta un análisis empírico de la integración comercial de Colombia y Asia del Este utilizando un modelo de equilibrio general computable, en el cual se evalúan los efectos de varios escenarios de liberalización comercial sobre los flujos de comercio y el bienestar. Los resultados muestran que existe un potencial importante para el desarrollo de las exportaciones colombianas de productos químicos, confecciones, textiles y otras cosechas como flores, semillas de frutas, café, entre otros. Este resultado no se deriva de la firma de un tratado de libre comercio, sino de la eliminación unilateral de aranceles en ambas regiones
    JEL: C68
    Date: 2004–12–31
  2. By: Takatoshi Ito; Yuri N. Sasaki; Kiyotaka Sato
    Abstract: We examine the pass-through effects of exchange rate changes on the domestic prices among the East Asian countries using the conventional pass-through equation and a VAR analysis. First, dynamics of pass-through from the exchange rate to import prices and consumer prices is analyzed using the conventional model of pass-through based on the micro-foundations of the exporter's pricing behavior. Both the short-run and long-run elasticities of the exchange rate pass-through are estimated. Second, a vector autoregression (VAR) technique is applied to the pass-through analysis. A Choleski decomposition is used to identify structural shocks and to examine the pass-through of each shock to domestic price inflation by the impulse response function and variance decomposition analyses. Both the conventional analysis and VAR analysis show that while the degree of exchange rate pass-through to import prices is quite high in the crisis-hit countries, the pass-through to CPI is generally low, with a notable exception of Indonesia. The VAR analysis shows that the size of the pass-through of monetary shocks is even larger in Indonesia. Thus, it was Indonesia's accommodative monetary policy as well as the high degree of the CPI responsiveness to exchange rates that contributed to high domestic price inflation, resulting in the loss of its export competitiveness, even when the currency depreciated sharply in nominal terms in 1997-98.
    Date: 2005–05
  3. By: Reiko Aoki; Tomoko Saiki
    Abstract: Product (material) patents were introduced to Japan in 1976. We examine data prior to 1976 and years immediately following to determine the law's effect on domestic pharmaceutical market, innovation by pharmaceutical firms, and relationship of the Japanese market to the rest of the world. There is evidence that the domestic market became more concentrated and quality of pharmaceutical innovation changed after the introduction. This is because introduction of product patents is different from simple strengthening of existing technology protection such as increasing breadth.
    Date: 2005–04
  4. By: Haruko Noguchi; Satoshi Shimizutani
    Abstract: Along with the introduction of the long-term care insurance scheme, the Japanese government in 2000 for the first time allowed for-profit operators to compete head-on with non-profit operators in the provision of at-home care services. This study examines quality differentials between the nonprofit and the for-profit sector in Japan's elderly care industry, concentrating on home helpers and staff nurses. Taking advantage of a unique and rich micro-level survey, the study finds that although nonprofit operators provide higher quality of care, as measured by simple averages of workers' characteristics, the advantage of nonprofits disappears once their higher wage is corrected for. This finding confirms that the seemingly higher quality of care provided by nonprofit operators is due to the nonprofit wage premium, resulting from their preferential status which provides non-distributional constraints and favorable tax treatment.
    Keywords: Japanese long-term care insurance, long-term care, nursing homes, home helpers, staff nurses, nonprofit wage premium, quality of care, treatment effect approach
    JEL: I11
    Date: 2005–04
  5. By: Mengtao Gao (CCER - China Center for Economic Research); Yang Yao (CCER - China Center for Economic Research)
    Abstract: This paper studies the age structure of the gender gap in household health care allocation by using survey data coillected on 1428 rural households (8414 persons) in 8 Chinese provinces. The primary concerns are rthe treatment rate and expenditure conditional on reported 2-week illnesses. To avoid the potential bias in self-reported illness, in particular, the bias arising from wome's tendency to report more illnesses than men, conditional probit and OLS analyses are adopted. in addition, to take care the possibility that some illnesses have different impacts on men and women, we suppplement the study by looking at people's responses to two specific illnesses, cold and diarrhoea, that do not have gender implications. We employ several sets of variables measuring a person's work capability, occupation, political affiliation, and education to control his potential market values. Our results show that girls under age 13 do get significantly less medical care than boys of the same age, but prime-age wives get more than the husbands, and old-age wives get less than old-age husbands. While the results for the children agree with other studies, the pattern for prime-age and old-age adults is new and consistent with the considerations proposed above.
    Keywords: China, health care allocation, gender, rural
    JEL: I31 I38
    Date: 2004–10
  6. By: Soyuong Kim (Korea University); Sunghyun H. Kim (Tufts University); Yunjong Wang (Korea Institute for International Economic Policy)
    Abstract: This paper estimates the degree of risk sharing in 10 East Asian countries within the region and with OECD countries by using cross-country consumption correlation and formal regression analysis. Estimation results reveal that the degree of risk sharing is far from complete and even quite low for most countries in the region. Among individual countries, Taiwan and Singapore have the highest risk sharing, while Indonesia and Malaysia the lowest (and significantly negative) risk sharing. We find no consistent differences in the degree of risk sharing within East Asia and with OECD countries and the degree of risk sharing does not increase over time in most countries. We also measure potential welfare gains from complete risk sharing. The results show that for less developed countries in the region, potential risk sharing gains with OECD countries are larger than those within East Asia.
    Keywords: Consumption correlation, East Asia, financial integration, risk sharing, welfare gains
    JEL: F02 F36 F41
    Date: 2004–04
  7. By: Wanjoong Kim (Korea Institute for International Economic Policy); Terrence Kinal (Korea Institute for International Economic Policy)
    Abstract: Exchange rate fluctuations provide a source of movements in employment both within and across industries. Previous studies focus on only developed countries such as OECD countries. But country and industry characteristics in developing countries are different form those developed countries, so that the effects of fluctuations in real exchange rates on employment in developing countries may be different form those in developed countries. This paper examines the relationship between exchange rates and employment using a panel of 28 industries in three developing countries (Korea, Malaysia, and the Philippines) from 1970 to the 1990s using a panel VAR model. The impulse response functions show that Korean and Malaysian employment responds positively only after 1985. Compared to e the developed countries over the same period, the developing countries show a larger response to exchange rate shocks.
    Keywords: Exchange rates, employment, East Asian Countries, Panal VAR
    JEL: F31 F3 F4 E24
    Date: 2004–11
  8. By: Poh-Kam Wong (Entrepreneurship Centre, National University of Singapore); Annette Singh (Entrepreneurship Centre, National University of Singapore)
    Abstract: This paper examines the changing pattern of technological specialization of the four small, newly industrializing economies (NIEs) from East Asia as they move up the economic development ladder. In addition, the paper also investigates whether there is convergence or divergence between these NIEs and two reference groups of advanced economies -- eight small, advanced European countries and the G7. We find that the East Asian NIEs had a higher degree of technological concentration than both the group of 8 advanced small European economies and the group of G7 countries, although the differences had narrowed over time. The East Asian NIEs’ technological specialization pattern has also been diverging from those of the small advanced European countries, while converging among themselves (as well as towards the G7 until recently).
    Keywords: Technological Specialization; Innovation; Patent Statistics; Newly Industrialized Economies
    JEL: O P
    Date: 2005–05–11
  9. By: Nigel Driffield (Aston Business School); Vidya Mahambare (Cardiff Business School); Sarmistha Pal (Brunel University)
    Abstract: Despite the seminal work of Claessens et al. (2002), who highlighted the role of ownership structure on firm performance in East Asia, the relationship between capital structure and ownership remains much unexplored. This is important, given recent empirical and theoretical work linking capital structure and performance. The novelty of the present paper is that in examining the effects of ownership concentration on capital structure and firm performance, it not only allows for simultaneity between capital structure and firm performance, but also controls for one possible source of moral hazard related to the higher voting rights relative to cash flow rights. The paper clearly establishes that results are rather country-specific and the effects of ownership structure on firm performance cannot be delineated from its effects on leverage. More interestingly, these results highlight that higher voting rights could pose some moral hazard problem if there is a controlling manager shareholder called Cronyman in our analysis. Evidently family ownership could mitigate some of these moral hazard problems, though it could exacerbate the problem of over-lending. As such, the results presented here confirm and extend the essential findings of Claessens et al. (2002).
    Keywords: Asian Crisis, Corporate Governance, Capital structure, Firm performance, Expropriation of minority shareholders, Moral hazard, 3SLS estimates, Simultaneity bias, Non-linearity.
    JEL: G32
    Date: 2005–05–09
  10. By: Nigel Driffield (Aston Business School, Birmingham, UK); Vidya Mahambare (Cardiff Business School, Cardiff UK); Sarmistha Pal (Department of Economics & Finance, Brunel University, UK)
    Abstract: While the aggregate macroeconomic analysis of the recent Asian Crisis highlights the moral hazard problem of bad loans in poorly supervised and regulated East Asian economies, there is very little firm-level analysis to characterize it. The present paper attempts to fill in this gap of the literature and focuses on the process of dynamic adjustment of the actual leverage towards the optimum. Our results based on the Worldscope firm-level panel data indicate a close correspondence between excess leverage and excess capital stock and also reveal signs of corporate inertia. This inertia has been evident not only among firms with excess capital stock, but also among those with larger share of short-term debt in the worst affected countries, especially during the pre-crisis and crisis periods; the adjustment process was however speeded up in the post-crisis period. One possible way out of this problem of bad loans would be to develop the equity market and induce the firms to rely more on equity finance.
    Keywords: Moral hazard, Over-lending and over-investment, Speed of adjustment, Inertia, Generalised Methods of Moments
    JEL: G32
    Date: 2005–05–09
  11. By: Jun Cai (City University of Hong Kong); Yan-Leung Cheung (City University of Hong Kong); Raymond Lee (City University of Hong Kong); Michael Melvin (W. P. Carey School of Business Department of Economics)
    Abstract: The yen provided foreign exchange market participants with 'once-in-a-generation' volatility movements in 1998. For instance, after many months of uneven yen depreciation a remarkable period of yen appreciation was experienced where, in one two-day period, the U.S. dollar dropped in value by 20 yen, market-makers were refusing to quote yen/dollar prices for more than $1 million, and funds with short yen positions incurred massive losses. Not since the early 1970s has the yen-dollar exchange rate experienced such shifts. Analysts claimed that the yen reversal was due to order flow driven by changing tastes for risk and hedge-fund herding on unwinding yen ‘carry trade’ positions rather than any fundamentals related to the yen. In this paper, we examine the high-frequency evidence on the yen/dollar exchange rate in 1998 and provide a detailed characterization of the return volatility. Evidence of shifting fundamentals is provided by a comprehensive list of macroeconomic announcements from both the U.S. and Japan. While macroeconomic announcements and intervention are found to have significant effects on volatility, our results lead to the conclusion that order flow played a more important role than news regarding fundamentals. Evidence regarding the independent effect of order flow was provided by spot, forward, and futures positions of major market participants. These position changes are found to be significant determinants of volatility. Since such portfolio shifts are revealed to the market through trading, the results are consistent with order flow playing a significant role in the revelation of private information and the associated exchange rate shifts.
    JEL: F31 G14 G15 C22
  12. By: Takatoshi Ito (Hitotsubashi University); Michael Melvin (W. P. Carey School of Business Department of Economics)
    Abstract: A first step in the 'big-bang' deregulation of Japanese financial markets was the deregulation of the foreign exchange market on April1, 1998. This paper provides an overview of the deregulation and then examines the early effects of the foreign exchange market deregulation. In particular we study how the bid-ask spread and conditional volatility in the yen/dollar foreign exchange market changed around the time of the deregulation. Intra-day data are analyzed with the following results: (1) Holding constant the effects of volume and volatility, the deregulation was associated with a convergence of Japanese quoted spreads toward those of other banks. (2) Modeling the persistence in volatility reveals that deregulation lowered conditional volatility.
    JEL: F3 G1
  13. By: Michael Melvin (W. P. Carey School of Business Department of Economics); Vincentiu Covrig (Singapore University); Buen Low (Nanyang Technological University)
    Abstract: Pricing in the Euroyen market is based on LIBOR, the London Interbank Offer Rate, set at 11am London time or TIBOR, the Tokyo Interbank Offer Rate, set at 11am Tokyo time. Since the TIBOR panel is dominated by Tokyo city banks while the LIBOR panel is dominated by non-Japanese banks, the changing TIBOR-LIBOR spread reflects the credit risk associated with Japanese banks or the 'Japan premium.' In this paper, we investigate the determinants of this 'Japan premium.' The spread is modeled as a function of determinants of bank default and firm value suggested by a theory of credit spreads. Our results suggest that systematic variation in the spread can be explained by interest rate and stock price effects along with public information flows of good and bad news regarding Japanese banking, with a separate individual role for Japanese bank credit downgrades and upgrades.
  14. By: Catherine Locatelli (LEPII - Laboratoire d'Economie de la Production et de l'Intégration Internationale - - CNRS : FRE2664 - Université Pierre Mendès-France - Grenoble II)
    Abstract: Russia's gas strategy is currently undergoing fundamental changes. The internationalisation of Russia's gas exchanges is at the heart of Gazprom's strategy. The institutional and organisational developments in its principal export market, that of the European Union is a major challenge that brings opportunities as well as constraints. The European Union is still its main export market, but the emergence of Asia as a significant importer of gas is likely to modify the Russian gas export strategy. To some extent, Russia could bring these various potential markets into competition, at least as far as Europe and Asia are concerned. With almost 40% of world gas reserves, Russia undoubtedly has a card to play on the international energy markets.
    Keywords: Russian gas exportation;Liberalisation;European gas market;Russian gas policy
    Date: 2004–12–02
  15. By: Claudio Morana (SEMEQ Department - Faculty of Economics - University of Eastern Piedmont)
    Abstract: Has deflation contributed to the long lasting stagnation of the Japanese economy? Could the Bank of Japan have stopped deflation by implementing a more expansionary monetary policy? Our tentative answers are probably not to the first question, and probably yes to the second question. We find that the total cost of deflation over the period 1995-2003 has been close to a 1.1% rate of lost GDP. Yet, on the basis of statistical significance and robustness to specification choices, this evidence is not compelling. On the other hand, the estimated positive linkage between nominal base money growth and inflation is significant and robust, even given current economic conditions. However, in order to be inflationary, monetary policy should have been more expansionary than what actually observed, even since the launch of the quantitative easing in 2001.
    Keywords: deflation, monetary policy, Friedman’s rule, Japan, generalised flexible least squares, time-varying parameter VAR, thick modelling.
    JEL: C32 E50
    Date: 2004–11

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