nep-sea New Economics Papers
on South East Asia
Issue of 2005‒06‒14
fourteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Bank Lending and Property Prices in Hong Kong By Gerlach, Stefan; Wensheng, Peng
  2. Do Risk Premia Protect from Banking Crises? By Gersbach, Hans; Wenzelburger, Jan
  3. How Transition Paths Differ: Enterprise Performance in Russia and China By Bhaumik, Sumon Kumar; Estrin, Saul
  4. A Phillips Curve for China By Scheibe, Jörg; Vines, David
  5. Trade Costs and Location of Foreign Firms in China By Amiti, Mary; Javorcik, Beata Smarzynska
  6. Gifted Kids or Pushy Parents? Foreign Acquisitions and Plant Performance in Indonesia By Arnold, Jens; Javorcik, Beata Smarzynska
  7. The Real Effect of Banking Crises By Dell'Ariccia, Giovanni; Detragiache, Enrica; Rajan, Raghuram G
  8. Branch banking, bank competition, and financial stability By Mark Carlson; Kris James Mitchener
  9. Determinants of Cellular Competition in Asia By Chakravarty Sujoy
  10. ""Voice" and "Exit" in Japanese Firms during the Second World War: Sanpo Revisited" By Tetsuji Okazaki
  11. "Large Market Design in Dominance" By Hitoshi Matsushima
  12. Capital Inflows, Policy Responses, and Their Ill Consequences: Thailand, Malaysia, and Indonesia in the Decade Before the Crises By Clara Garcia
  13. The Restructuring of Cotton Spinning Companies in Postwar Japan By Takeshi Abe
  14. Regional redistribution policy and welfare in a two-region endogenous growth model By Yutaro Murakami

  1. By: Gerlach, Stefan; Wensheng, Peng
    Abstract: This Paper studies the relationship between residential property prices and lending in Hong Kong. This is an interesting topic for three reasons. First, swings in property prices have been extremely large and frequent in Hong Kong. Second, under the currency board regime, monetary policy cannot be used to guard against asset price swings. Third, despite the collapse in property prices since 1998, the banking sector remains sound. While the contemporaneous correlation between lending and property prices is large, our results suggest that the direction of influence goes from property prices to bank credit rather than conversely.
    Keywords: bank lending; Hong Kong; property prices
    JEL: E32 E42 G21
    Date: 2004–12
  2. By: Gersbach, Hans; Wenzelburger, Jan
    Abstract: This paper studies the question to what extent premia for macroeconomic risks in banking are sufficient to avoid banking crises. We investigate a competitive banking system embedded in an overlapping generation model subject to repeated macroeconomic shocks. We show that even if banks fully incorporate macroeconomic risks in their pricing of loans, a banking system may enter bankruptcy with probability one. A major cause for this default is that risk premia of a competitive banking system may become too small if the capital base is low.
    Keywords: banking crises; banking regulation; financial intermediation; macroeconomic risks; risk premia
    JEL: D41 E40 G20
    Date: 2005–02
  3. By: Bhaumik, Sumon Kumar; Estrin, Saul
    Abstract: We use enterprise data to analyse and contrast the determinants of enterprise performance in China and Russia. We find that in China, enterprise growth and efficiency is associated with rapid increases in factor inputs, but not correlated with ownership or institutional factors. However, in Russia, enterprise growth is not associated with increases in factor quantity (except for labour) or quality. The main determinants of company performance are instead demand and institutional factors at a regional level. We explore possible interpretations of these results, including the impact of institutional and managerial quality.
    Keywords: enterprise performance; privatization in Russia and China
    JEL: D23 L22 O12 P31
    Date: 2005–02
  4. By: Scheibe, Jörg; Vines, David
    Abstract: This paper models Chinese inflation using an output gap Phillips curve. Inflation modelling for the world’s sixth largest economy is a still under-researched topic. We estimate a partially forward-looking Phillips curve as well as traditional backward-looking Phillips curves. Using quarterly data from 1988 to 2002, we estimate a vertical long-run Phillips curve for China and show that the output gap, the exchange rate, and inflation expectations play important roles in explaining inflation. We adjust for structural change in the economy where possible and estimate regressions for rolling sample windows in order to test for and uncover gradual structural change. We evaluate a number of alternative output gap estimates and find that output gaps which are derived from production function estimations for the Chinese economy are of more use in estimating a Phillips curve than output gaps derived from simple statistical trends. Partially forward-looking Phillips curves provide a better fit than backward-looking ones. The identification of a non-increasing exchange rate effect on inflation during a period of large import growth hints at increased pricing to market behaviour by importers. This result is relevant to policies regarding possible exchange rate liberalization in China.
    Keywords: China; monetary policy; output gap; Phillips curve; structural change
    JEL: E12 E31 E32
    Date: 2005–03
  5. By: Amiti, Mary; Javorcik, Beata Smarzynska
    Abstract: This study examines the determinants of entry by foreign firms, using information on 515 Chinese industries at the provincial level during 1998-2001. The analysis, rooted in the new economic geography, focuses on market and supplier access within and outside the province of entry, as well as production and trade costs. The results indicate that market and supplier access are the most important factors affecting foreign entry. Access to markets and suppliers in the province of entry matters more than access to the rest of China, which is consistent with market fragmentation due to underdeveloped transport infrastructure and informal trade barriers.
    Keywords: foreign direct investment; market access; supply access; trade costs
    JEL: F10 F23
    Date: 2005–03
  6. By: Arnold, Jens; Javorcik, Beata Smarzynska
    Abstract: This paper uses micro data from the Indonesian Census of Manufacturing to analyse the causal relationship between foreign ownership and plant productivity. To control for the possible endogeneity of the FDI decision, a difference-in-differences approach is combined with propensity score matching. An advantage of this method, which has not been previously applied in this context, is the ability to follow the timing of observed changes in productivity and other aspects of plant performance. The results suggest that foreign ownership leads to significant productivity improvements in the acquired plants. The improvements become visible in the acquisition year and continue in subsequent periods. After three years, the acquired plants outperform the control group in terms of productivity by 34 percentage points. The data also suggest that the rise in productivity is a result of restructuring, as acquired plants increase investment outlays, employment and wages. Foreign ownership also appears to enhance the integration of plants into the global economy through increased exports and imports.
    Keywords: acquisition; foreign direct investment; productivity
    JEL: D24 F23 O33
    Date: 2005–05
  7. By: Dell'Ariccia, Giovanni; Detragiache, Enrica; Rajan, Raghuram G
    Abstract: Banking crises are usually followed by a decline in credit and growth. Is this because crises tend to take place during economic downturns, or do banking sector problems have independent negative effects on the economy? To answer this question we examine industrial sectors with differing needs for financing. If banking crises have an exogenous detrimental effect on real activity, then sectors more dependent on external finance should perform relatively worse during banking crises. The evidence in this paper supports this view. Additional support comes from the fact that sectors that predominantly have small firms, and thus are typically bank dependent, also perform relatively worse during banking crises. The differential effects across sectors are stronger in developing countries, in countries with less access to foreign finance, and where banking crises were more severe.
    Keywords: bank lending channel; banking crises
    JEL: E44 G21
    Date: 2005–05
  8. By: Mark Carlson; Kris James Mitchener
    Abstract: It is often argued that branching stabilizes banking systems by facilitating diversification of bank portfolios; however, previous empirical research on the Great Depression offers mixed support for this view. Analyses using state-level data find that states allowing branch banking had lower failure rates, while those examining individual banks find that branch banks were more likely to fail. We argue that an alternative hypothesis can reconcile these seemingly disparate findings. Using data on national banks from the 1920s and 1930s, we show that branch banking increases competition and forces weak banks to exit the banking system. This consolidation strengthens the system as a whole without necessarily strengthening the branch banks themselves. Our empirical results suggest that the effects that branching had on competition were quantitatively more important than geographical diversification for bank stability in the 1920s and 1930s.
    Keywords: Branch banks ; Competition
    Date: 2005
  9. By: Chakravarty Sujoy
    Abstract: Using data from the International Telecommunications Union (ITU) Database I explore the market for the provision of cellular services in Asia. This study looks at the diffusion of mobile technologies and mobile tariffs over the last decade. It compares the degree of competition, regulation and its effects in Asia with mobile markets in developed countries. It also analyses a 29 country 10 year panel data set in order to study the determinants of mobile penetration in Asia. The results indicate that competition has played a major role in increasing the diffusion of cell phones. The presence of an independent telecommunication regulator as well as increasing capacity of fixed line telephone exchanges has also positively affected the diffusion of mobile services. The last part of the study takes a brief look at the cellular market in India, where mobile service provision has seen startling growth in the last decade. This growth has made for falling tariffs, increase in the number of firms and technologies and a large subscriber base which is still growing at a significant rate. The structure of competition is explored in some detail for regional markets using monthly data from 1997 to 2004.
    Keywords: Competition, Cellular, Regulation, Telecommunication.
    JEL: D4
    Date: 2005–06–07
  10. By: Tetsuji Okazaki (Faculty of Economics, University of Tokyo)
    Abstract: During the Second World War, the Japanese government and private sector searched for and implemented new mechanisms for coordination and motivation. One of these was sangyo hokokukai (sanpo). Sanpo unit was basically an organization of the employer and employees of each firm, which held meetings to moderate labor relations. Due to the government policy to promote sanpo units, around 70% of the total workers in Japan were organized into sanpo units in the early 1940s. As the members of labor unions and the workers of the companies which had factory committees, were only 7 % and 5% of the total workers in 1936 respectively, sanpo was the first large scale mechanism for Japanese employees to voice. In this paper, I examined the role of sanpo, using prefecture level data and firm level data, based on a framework integrating the "voice view" of unionism and the transaction cost economics. It was found that sanpo reduced the participation rate in labor disputes, and enhanced labor productivity at least in some period.
    Date: 2005–06
  11. By: Hitoshi Matsushima (Faculty of Economics, University of Tokyo)
    Abstract: This paper introduces a new concept of market mechanism design into general economic environments with finite but many traders, where multiple objects are traded and any combination of complements and substitutes is permitted. The auctioneer randomly divides traders into multiple groups. Within each group, trades occur at the market-clearing price vector of another group. With private values, any undominated strategy profile mimics price-taking behavior, enforcing perfect competition. With interdependent values, any twice iteratively undominated strategy profile mimics the rational expectations equilibrium, enforcing ex post efficiency. Our mechanisms are detail-free, i.e., they do not depend on the details of model specification.
    Date: 2005–06
  12. By: Clara Garcia
    Abstract: Capital inflows, especially when volatile, denominated in foreign currencies and not properly hedged against exchange rate risks, may pose macroeconomic and financial problems in the recipient economy. In this paper we analyze the mechanisms through which those problems arise; and we assess the policies that national authorities may resort to in order to prevent them, under the assumption that capital inflows are the result of previous stabilization and liberalization packages. Also, we study the use and effectiveness of policy responses to capital inflows in Thailand, Malaysia, and Indonesia in the years prior to the 1997-98 financial crises. We conclude that policies that reinforce the stabilization and adjustment trends of the 1980s are more likely to be (at least partially) ineffective or even counterproductive, whereas the measures that depart from those trends appear to have a higher potential for effectiveness but face obstacles to implementation.
    Date: 2004
  13. By: Takeshi Abe (Graduate School of Economics, Osaka University)
    Abstract: Since the mid-1960s, the Japanese cotton spinning industry has experienced steady decline. However, the whole process of this decline was the synthesis of several different firm strategies within the industry. If we look at this process, three types of firm strategies can be found; (1) positive restructuring from textiles to non-textiles (Kanebo, Nittobo, and Nisshinbo), (2) adherence to textile manufacturing (three shinbo: Kondobo, Tsuzukibo and Omikenshi), and (3) inactive restructuring in some large companies (such as Toyobo).
    Keywords: cotton spinning companies, postwar Japan, restructuring, Nisshinbo, shinbo, Toyobo
    JEL: N65 N85
    Date: 2005–06
  14. By: Yutaro Murakami (Graduate School of Economics, Osaka University)
    Abstract: This paper constructs a two-region endogenous growth model with productive government expenditure to analyze the relationship between regional redistribution of public input and the welfare of residents in each region. This paper shows that the redistribution policy may be Pareto improving if the distribution rate of a more populous region is increased because it raises the equilibrium growth rate. Furthermore, the higher the inequalities between the labor populations are, the greater the possibility of a Pareto improving policy.
    Keywords: Endogenous growth; Government expenditure; Regional distribution; Welfare; Pareto improving policy
    JEL: H53 O41 R58
    Date: 2005–03

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