|
on South East Asia |
| By: | Michael Funke |
| Abstract: | The New Keynesian Phillips curve (NKPC) posits the dynamics of inflation as forward looking and related to marginal costs. In this paper we examine the empirical relevance of the NKPC for mainland China. The empirical results indicate that an augmented (hybrid) NKPC gives results that are consistent with the data generating process. It is in this respect that the NKPC provides useful insights into the nature of inflation dynamics in mainland China as well as useful insights for the conduct of monetary policy. |
| Keywords: | China, Inflation, New Keynesian Phillips Curve |
| JEL: | C22 E31 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:ham:qmwops:20507&r=sea |
| By: | Robert P. Flood; Andrew K. Rose |
| Abstract: | This paper develops a simple methodology to test for asset integration, and applies it within and between American stock markets. Our technique relies on estimating and comparing expected risk-free rates across assets. Expected risk-free rates are allowed to vary freely over time, constrained only by the fact that they must be equal across (risk-adjusted) assets in well integrated markets. Assets are allowed to have standard risk characteristics, and are constrained by a factor model of covariances over short time periods. We find that implied expected risk-free rates vary dramatically over time, unlike short interest rates. Further, internal integration in the S&P 500 market is never rejected and is generally not rejected in the NASDAQ. Integration between the NASDAQ and the S&P, however, is always rejected dramatically. |
| Keywords: | Financial assets , United States , Stock markets , Risk premium , Asset prices , Economic models , |
| Date: | 2004–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/110&r=sea |
| By: | Abdul Abiad; Nienke Oomes; Kenichi Ueda |
| Abstract: | The study documents evidence of a "quality effect" of financial liberalization on allocative efficiency, which is measured by the dispersion in Tobin's Q across firms. Based on a simple model, the authors predict that financial liberalization, by equalizing access to credit, reduces the variation in expected marginal returns. They test this prediction using a new financial liberalization index and firm-level data for five emerging markets: India, Jordan, Korea, Malaysia, and Thailand. They find strong evidence that financial liberalization, rather than financial deepening, improves allocative efficiency. |
| Keywords: | Capital , India , Jordan , Korea, Republic of , Malaysia , Thailand , Investment , Credit , Financial systems , Emerging markets , Forecasting models , |
| Date: | 2004–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/112&r=sea |
| By: | Luis Ignacio Jácome |
| Abstract: | This paper stresses three factors that amplified the 1990s financial crisis in Ecuador, namely institutional weaknesses, rigidities in public finances, and high financial dollarization. Institutional factors restricted the government's ability to respond in a timely manner and efficiently enough to prevent the escalation of the banking crisis and spurred the adoption of suboptimal policy decisions. Public finance rigidities limited the government's capacity to correct existing imbalances and the deteriorating fiscal stance associated with the costs of the financial crisis. Financial dollarization increasingly reduced the effectiveness of financial safety nets, fostered foreign currency demand, and accelerated a currency crisis, thereby further worsening the solvency of banks. These three factors reinforced each other, exacerbating costs as the economy went through a triple banking, currency, and fiscal crisis. |
| Keywords: | Financial crisis , Ecuador , Fiscal policy , Dollarization , |
| Date: | 2004–02–09 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/12&r=sea |
| By: | Michael T. Gapen; Yingbin Xiao; Cheng Hoom Lim; Dale F. Gray |
| Abstract: | In this paper, we examine the ability of the contingent claims approach (CCA) to identify corporate sector and economy-wide vulnerabilities. We apply the Moody's MfRisk model, which uses aggregated CCA principles, to assess vulnerabilities retroactively in two historical country cases. The results indicate that the method may prove helpful in identifying corporate sector vulnerabilities and estimating the associated value of risk transfer across interrelated balance sheets of the corporate, financial, and public sectors. |
| Keywords: | Credit , Brazil , Thailand , Risk premium , Financial sector , Public sector , Economic models , |
| Date: | 2004–07–27 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/121&r=sea |
| By: | Marco Arnone; Luca Bandiera |
| Abstract: | Electronic money (e-money), as a network good, could become an important form of currency in the future. Such a development could affect monetary policy effectiveness. If an increased use of e-money substantially limits the demand for central bank reserves, this limitation would require changes in the central bank operational target and a closer coordination of monetary and fiscal policies. Also, the optimal size of monetary unions would be different. However, the current level of e-money use does not seem to pose a threat to the stability of the financial system. Thus, central banks can successfully implement the objectives of monetary policy. |
| Keywords: | Money , Monetary policy , Monetary unions , Monetary operations , |
| Date: | 2004–07–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/122&r=sea |
| By: | Ben Lockwood; Ehtisham Ahmad; Raju Singh |
| Abstract: | The value-added tax (VAT) in China has the unusual feature that capital goods are included in the VAT base. In addition, most services are subject to the business tax, which is not creditable against VAT, but which accrues to local governments, and operates as a turnover tax. On grounds of economic efficiency, it would be desirable to eliminate these distortions so that domestic producers are not increasingly placed at a disadvantage as China dismantles tariff and nontariff barriers on competing goods. Reforming indirect taxation would however generate considerable revenue losses for local governments and, in the absence of any compensatory mechanisms, there would be significant impediments to the needed reforms. This paper focuses on the extent of revenue losses, their distribution across provinces, and possible options for compensation. |
| Keywords: | Fiscal policy , China , Indirect taxation , Value added tax , Tax reforms , |
| Date: | 2004–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/125&r=sea |
| By: | Gilda Fernandez; Cem Karacadag; Rupa Duttagupta |
| Abstract: | This paper identifies the institutional and operational requisites for transitions to floating exchange rate regimes. In particular, it explores key issues underlying the transition, including developing a deep and liquid foreign exchange market, formulating intervention policies consistent with the new regime, establishing an alternative nominal anchor in the context of a new monetary policy framework, and building the capacity of market participants to manage exchange rate risks and of supervisory authorities to regulate and monitor them. It also assesses the factors that influence the pace of exit and the appropriate sequencing of exchange rate flexibility and capital account liberalization. |
| Keywords: | Exchange rate policy , Foreign exchange , Exchange markets , Intervention , Capital account liberalization , Flexible exchange rate policy , |
| Date: | 2004–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/126&r=sea |
| By: | Enrica Detragiache; Poonam Gupta |
| Abstract: | Foreign banks have greatly increased their presence in emerging market countries in recent years. This paper compares the performance of domestic banks and a long-established group of foreign banks during the recent crisis in Malaysia. We find that the sharpest differences are between banks mainly active in Asia (including all domestic and some foreign banks) and foreign banks not specialized in Asia. The latter group performed better than the rest during the crisis, maintaining higher profitability thanks to higher interest margins and lower nonperforming loans. Foreign banks did not abandon the local market during the crisis and received less government support than domestic institutions. |
| Keywords: | Banks , Malaysia , Emerging markets , Banking systems , Financial crisis , Economic models , |
| Date: | 2004–08–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/129&r=sea |
| By: | Sibel Yelten |
| Abstract: | This paper uses the Sjaastad model to estimate the optimal currency area for the Nepalese rupee and concludes that, currently, Nepal may be reasonably well off with its peg to the Indian rupee. As its economy opens and its trade base and trading partners expand, it may want to reevaluate whether moving toward an exchange rate basket including the U.S. dollar may be a better policy choice. The regression results indicate that, currently, the prices of imported goods in Nepal are solely influenced by India, suggesting that with the peg to the Indian rupee, Nepal can isolate the import side of its economy completely from external shocks. On the export side, the regression results indicate that Nepalese export prices seem, to a large extent, to be influenced by U.S. prices. However, the export price index had to be constructed, and the construction methodology is likely to entail an overestimation of the impact of the U.S. dollar. |
| Keywords: | Monetary unions , Nepal , Asia , Financial crisis , Exchange rates , Currencies , Currency pegs , Economic models , |
| Date: | 2004–08–16 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/142&r=sea |
| By: | Kevin C. Cheng |
| Abstract: | This paper reexamines Korea's trade flows. Using the standard demand-based models, the paper finds that owing to the increasing share of electrical and electronic products (EEPs) in total exports, the income elasticity of the Korean export demand has fallen sharply while its price elasticity has risen dramatically. This is a curious result, which begs the question of why. Accordingly, an alternative supply-based model shows that the sharp increase in exports of EEPs is mainly due to Korea's remarkable ability to make technological improvements in their production. After reestimating the standard import equation, the paper finds estimates similar to those from previous studies. Since most of these imports are industrial inputs, they are jointly determined by consumption, fixed investment, and exports. |
| Keywords: | Trade policy , Korea, Republic of , Exports , Imports , Economic models , |
| Date: | 2004–08–18 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/145&r=sea |
| By: | Dong He |
| Abstract: | This paper aims to provide a balanced assessment of Korea Asset Management Corporation's role in resolving nonperforming loans in the aftermath of the 1997-98 financial crisis. It argues that KAMCO's incentive to dispose of NPLs can be explained by a strong social desire for a recovery of public funds injected for financial sector restructuring. KAMCO's market-making role also helped overcome informational and coordination problems in the development of a market for distressed assets. |
| Keywords: | Asset management , Korea, Republic of , Bank restructuring , |
| Date: | 2004–09–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/172&r=sea |
| By: | Tao Wang |
| Abstract: | This paper reviews the evolution of China's real effective exchange rate between 1980 and 2002, and uses a structural vector autoregression model to study the relative importance of different types of macroeconomic shocks for fluctuations in the real exchange rate. The structural decomposition shows that relative real demand and supply shocks account for most of the variations in real exchange rate changes during the estimation period. The paper also finds that supply shocks are as important as nominal shocks in accounting for real exchange rate fluctuations, in contrast with other studies that show that, in industrial countries, nominal shocks are more important in explaining real exchange rate fluctuations. |
| Keywords: | Real effective exchange rates , China , |
| Date: | 2004–02–17 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/18&r=sea |
| By: | Garry J. Schinasi |
| Abstract: | The main objective of this paper is to propose a definition of financial stability that has some practical and operational relevance. Financial stability is defined in terms of its ability to facilitate and enhance economic processes, manage risks, and absorb shocks. Moreover, financial stability is considered a continuum: changeable over time and consistent with multiple combinations of the constituent elements of finance. The paper also discusses several practical implications of the definition that should be considered when using it for policy analysis or developing an analytical framework. |
| Keywords: | Financial stability , Financial crisis , |
| Date: | 2004–10–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/187&r=sea |
| By: | Márcio Valério Ronci |
| Abstract: | This paper assesses the effect of constrained trade finance on trade flows in countries undergoing financial and balance of payments crises. Most of the countries that had a major crisis had a significant trade contraction, while trade-related finance declined sharply. However, trade may also be affected by other variables such as world demand, domestic demand, banking crises, changes in export and import prices, and real exchange rate depreciation. To estimate the effect of constrained trade finance on trade flows, we estimate import and export volume equations including explicitly trade financing as an explanatory variable in addition to the usual variables such as relative prices and income. We conclude that constrained trade finance is a factor in explaining both export and import volumes in the short-run. A fall in external trade finance explains a relatively small part of the trade loss during crises, while a fall in trade financing in connection with domestic banking crisis can lead to a substantial loss of trade. |
| Keywords: | Trade , Public finance , Financial crisis , |
| Date: | 2004–12–13 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/225&r=sea |
| By: | Natalia T. Tamirisa |
| Abstract: | This paper examines how the macroeconomic effects of capital controls vary depending on which type of international financial transaction they cover. Drawing on Malaysia's experiences in regulating the capital account during the 1990s, it finds, in an error-correction model, that capital controls generally have statistically insignificant effects on the exchange rate. Controls on portfolio outflows and on bank and foreign exchange operations facilitate reductions in the domestic interest rate, while controls on portfolio inflows have the opposite effect, in line with the theoretical priors. Controls on international transactions in the domestic currency and stock market operations have statistically insignificant effects on the interest rate differential. |
| Keywords: | Capital controls , Malaysia , Capital flows , Investment , |
| Date: | 2004–01–24 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/3&r=sea |
| By: | Nicolas R. Blancher; Thomas Rumbaugh |
| Abstract: | China's increasing integration with the global economy has contributed to sustained growth in international trade. Its exports have become more diversified, and greater penetration of industrial country markets has been accompanied by a surge in China's imports from all regions-especially Asia, where China plays an increasingly central role in regional specialization. Tariff reforms have been implemented in China since the 1980s; and, with its recent WTO accession, China has committed itself to additional reforms that are farreaching and challenging. Sustained implementation of these commitments would further deepen China's international integration and generate benefits for most partner countries. |
| Keywords: | International trade , China , World Trade Organization , |
| Date: | 2004–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/36&r=sea |
| By: | Rebecca N. Coke; Andrew Berg |
| Abstract: | Many estimates of early-warning-system (EWS) models of currency crisis have reported incorrect standard errors because of serial correlation in the context of panel probit regressions. This paper documents the magnitude of the problem, proposes and tests a solution, and applies it to previously published EWS estimates. We find that (1) the uncorrected probit estimates substantially underestimate the true standard errors, by up to a factor of four; (2) a heteroskedasicity- and autocorrelation-corrected (HAC) procedure produces accurate estimates; and (3) most variables from the original models remain significant, though substantially less so than had been previously thought. |
| Keywords: | Crisis prevention , Currencies , Economic models , |
| Date: | 2004–03–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/39&r=sea |
| By: | Mary Amiti; Lisa Ann Cameron |
| Abstract: | The paper finds a significant shift in the economic characteristics of civil conflicts during the1990s. Conflicts have become shorter but with more severe contractions and a stronger recovery of growth. The overall length and cost of the conflict cycle has probably declined. The stance of macroeconomic policy was an important factor while the underlying "conflict process" remained unchanged. This shift seems related to changes in aid flows since the Cold War: donors became disinclined to provide support during conflict, but more inclined after conflict. These findings are buttressed by the post-conflict experience of countries that received financial assistance from the IMF and of the Democratic Republic of Congo (DRC). These findings have implications for policy and aid priorities after conflict. |
| Keywords: | Economic conditions , Indonesia , Wages , Demand , |
| Date: | 2004–05–25 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/79&r=sea |
| By: | Irina Tytell; Shang-Jin Wei |
| Abstract: | Monetary and fiscal policies around the world are in better shape today than two decades ago. This paper studies whether financial globalization has helped induce governments to pursue better macroeconomic policies (the "discipline effect"). The empirical tests have two innovations. First, we recognize potential endogeneity of the observed capital flows in a given country and employ an instrumental variable approach that relies on the autonomous (global) component of the capital flows. Second, we recognize inherent discreteness in defining good versus bad macroeconomic policies and use a transition matrix technique to determine whether capital flows are effective in inducing substantial qualitative policy shifts. Our results suggest that, in spite of the plausibility of the "discipline effect" in theory, it is not easy to find strong and robust causal evidence. There is some evidence that financial globalization may have induced countries to pursue low-inflation monetary policies. However, there is no evidence that it has encouraged low budget deficits. |
| Keywords: | Globalization , Financial sector , Inflation targeting , Capital flows , |
| Date: | 2004–06–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/84&r=sea |
| By: | Tao Sun |
| Abstract: | This paper develops an approach for forecasting in Thailand core inflation. The key innovation is to anchor the projections derived from the short-term time-series properties of core inflation to its longer-run evolution. This involves combining a short-term model, which attempts to distill the forecasting power of a variety of monthly indicators purely on goodness-of-fit criteria, with an equilibrium-correction model that pins down the convergence of core inflation to its longer-run structural determinants. The result is a promising model for forecasting Thai core inflation over horizons up to 10, 24, and 55 months, based on a root mean-squared error criterion as well as a mean absolute error criterion. |
| Keywords: | Forecasting models , Thailand , Inflation , |
| Date: | 2004–06–14 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/90&r=sea |
| By: | Alexander F. Tieman; Maria Demertzis |
| Abstract: | We provide a framework for analyzing the choice between optimal and robust monetary policy rules in the presence of paradigm uncertainty. We first discuss the conditions on uncertainty that render a robust rule preferable to an optimal rule. Second, we show how the degree of risk aversion of the policymaker increases the region in which the robust rule is preferred. |
| Keywords: | Monetary policy , Economic models , Risk premium , |
| Date: | 2004–06–23 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/96&r=sea |
| By: | Mario Fortuna; Ehtisham Ahmad; Raju Singh |
| Abstract: | Full implementation of an intergovernmental transfer system based on revenue capacities and expenditure needs could significantly improve both redistribution and equity objectives of the Chinese authorities. This was envisaged in the 1994 fiscal reforms, but the authorities were unable to implement the measures fully. This paper examines mechanisms that might facilitate effective implementation. |
| Keywords: | Fiscal reforms , China , Income distribution , Fiscal policy , |
| Date: | 2004–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/98&r=sea |
| By: | Marcos Chamon |
| Abstract: | Several papers argue that debt crises can be the result of self-fulfilling expectations that no one will lend to a country. I show this type of coordination failure can be eliminated by a combination of state-contingent securities and a mechanism that allows investors to promise to lend only if enough other investors do so as well. This suggests that runs on the debt of a single borrower (such as the government) can be eliminated, and that self-fulfilling features are more plausible when articulated in a context in which externalities among many decentralized borrowers allow for economy-wide debt runs to occur. |
| Keywords: | Financial crisis , External debt , Public debt , Crisis prevention , Liquidity , |
| Date: | 2004–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:04/99&r=sea |
| By: | Sandra A. Rivera; Valerie Cerra; Sweta Chaman Saxena |
| Abstract: | One of the most significant recent developments in world trade has been the entry of China into the World Trade Organization (WTO). This paper examines the implications of China's WTO accession for India's trade, using both econometrics and computable general equilibrium (CGE) models. The paper analyzes how India stands to lose or gain from China's WTO entry in terms of both the direct and competitive channels. |
| Keywords: | World Trade Organization , China , India , Trade , Economic models , |
| Date: | 2005–06–03 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/101&r=sea |
| By: | Robert Burgess; V. Haksar |
| Abstract: | International migration and large remittance flows have been prominent features of the Philippine economy for many decades. This paper describes the evolving pattern of migration and remittance flows and analyzes some of the channels through which remittances affect economic activity. The empirical evidence does not clearly support the purported short-term stabilizing effect on consumption of remittance flows. Furthermore, as in other countries, the longer term economic effect of such flows is ambiguous. |
| Date: | 2005–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/111&r=sea |
| By: | Tubagus Feridhanusetyawan |
| Abstract: | Preferential trade agreements (PTAs) in the Asia-Pacific region have proliferated rapidly over the past five years and are creating a complex web of intersecting bilateral and regional trade agreements. This paper describes the proliferation of these PTAs, discusses their characteristics and implementation, and assesses their potential effects. Realizing the potential gains from Asia-Pacific PTAs requires a commitment to liberalize sensitive sectors, to maintain consistent provisions, and to enforce agreements. Other factors, including administrative complications, also could undermine any potential gains. |
| Keywords: | International trade agreements , Asia and Pacific , Trade , |
| Date: | 2005–08–11 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/149&r=sea |
| By: | Robert Dekle; Kenneth Kletzer |
| Abstract: | An endogenous growth model with financial intermediation demonstrates how deposit insurance and prudential regulatory forbearance lead to banking crises and growth declines. The model assumptions are based on features of the Japanese financial system and regulation. The model demonstrates how banking and growth crises can evolve under perfect foresight. The dynamics for economic aggregates and asset prices predicted by the model are shown to be generally consistent with the experience of the Japanese economy and financial system through the 1990s. We also test our maintained hypothesis of rational expectations using asset price data for Japan over the 1980s and 1990s. |
| Keywords: | Economic growth , Japan , Financial crisis , |
| Date: | 2005–09–08 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/169&r=sea |
| By: | Benoît Mercereau |
| Abstract: | China's dramatic success in attracting foreign direct investment (FDI) has raised concerns that it has success diverted FDI from other countries in Asia. We develop a new methodology to estimate crowding out, and we use it to investigate the impact of China's emergence on FDI flows to Asia using data from 14 Asian economies from 1984 to 2002. The results suggest that China did not have much impact on FDI to other countries. In particular, lowincome economies, which compete with China for low-wage investment, and countries with low levels of education or scientific development do not seem to have been especially affected. |
| Keywords: | Foreign investment , China , |
| Date: | 2005–10–05 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/189&r=sea |
| By: | Era Dabla-Norris |
| Abstract: | The paper reviews the changing nature of intergovernmental fiscal relations between the provinces and the central government in China over the past two decades and provides an assessment of the success of previous reforms in meeting their objectives. Key existing weaknesses in the current system that undermine these objectives are identified. Alternative instruments, procedures, rules, and incentives that could result in better outcomes are outlined by drawing upon relevant cross-country experiences. |
| Keywords: | Intergovernmental fiscal relations , China , Income distribution , Fiscal policy , |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/30&r=sea |
| By: | Törbjörn I. Becker; Amadou N. R. Sy |
| Abstract: | Bid-ask spreads for Asian emerging market currencies increased sharply during the Asian crisis. A key question is whether such wide spreads were excessive or explained by models of bid-ask spreads. Precrisis estimates of standard models show that spreads during the crisis were in most cases tighter than spreads predicted by the models and there are few cases of excessive spreads. The result is largely explained by the substantial increase in exchange rate volatility during the crisis and to some extent by the level change. The empirical models have greater explanatory power for emerging- than for mature-market currencies. |
| Keywords: | Exchange markets , Asia , Financial crisis , Emerging markets , Currencies , |
| Date: | 2005–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/34&r=sea |
| By: | Mary Amiti; Beata K. Smarzynska Javorcik |
| Abstract: | This study examines the determinants of entry into 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: | Trade , China , Foreign investment , Emerging Markets , Supply , Economic models , |
| Date: | 2005–03–22 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/55&r=sea |
| By: | David Cook; Woon Gyu Choi |
| Abstract: | In a liquid financial market, investors are able to sell large blocks of assets without substantially changing the price. We document a steep drop in the liquidity of the Japanese stock market in the post-bubble period and a steep rise in liquidity risk. We find that, during Japan's deflationary period, firms with more liquid balance sheets were less exposed to stock market liquidity risk, while slowly growing firms were highly exposed to liquidity shocks. Also, aggregate liquidity had macroeconomic effects on aggregate demand through its effect on money demand. |
| Keywords: | Stock markets , Japan , Liquidity , Demand , |
| Date: | 2005–01–26 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/6&r=sea |
| By: | Oana M. Nedelescu; R. B. Johnston |
| Abstract: | The terrorist attacks that have occurred in the past few years around the world have raised international awareness of the danger of terrorism and its complex repercussions on the financial markets. This paper explores the ways in which financial markets reacted to the attacks and the authorities' responses. Well-functioning financial markets, bolstered by the prompt and effective reaction of the relevant authorities, were generally efficient in absorbing shocks stemming from terrorist attacks. The paper discusses market and regulatory responses to the terrorist attacks and the elements that should be strengthened so as to further enhance the resilience of financial markets to terrorism. |
| Keywords: | Anti-money laundering , Combating the financing of terrorism , Capital markets , |
| Date: | 2005–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/60&r=sea |
| By: | Raghuram Rajan; Giovanni Dell'Ariccia; Enrica Detragiache |
| 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 have been more severe. |
| Keywords: | Financial crisis , Banking systems , Insolvency , Bank resolution , |
| Date: | 2005–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/63&r=sea |
| By: | Charles Frederick Kramer; Mark R. Stone |
| Abstract: | Modifications to Japan's monetary policy framework will be needed as positive inflation resumes because the current monetary regime and operations are tailored to ending deflation. The paper suggests that the monetary regime should move from an "anti-deflation" objective to an inflation objective, complemented by a shift of monetary operations from a quantitative operating target to an interest rate target. There are also questions about the timing of these shifts and the particulars of such arrangements, but decisive answers are elusive. |
| Keywords: | Monetary policy , Japan , Monetary operations , Deflation , |
| Date: | 2005–04–20 |
| URL: | http://d.repec.org/n?u=RePEc:imf:imfwpa:05/73&r=sea |
| By: | Takao Kato (Colgate University, Columbia University and IZA Bonn); Cheryl Long (Colgate University, Stanford University and University of Electronic Science and Technology of China) |
| Abstract: | This paper provides evidence on how executive compensation relates to firm performance in listed firms in China. Using comprehensive financial and accounting data on China’s listed firms from 1998 to 2002, augmented by unique data on executive compensation and ownership structure, we find for the first time statistically significant sensitivities and elasticities of annual cash compensation (salary and bonus) for top executives with respect to shareholder value in China. In addition, sales growth is shown to be significantly linked to executive compensation and that Chinese executives are penalized for making negative profit although they are neither penalized for declining profit nor rewarded for rising profit insofar as it is positive. Perhaps more importantly, we find that ownership structure of China’s listed firms has important effects on pay-performance link in these firms. Specifically state ownership of China’s listed firms is weakening pay-performance link for top managers and thus possibly making China’s listed firms less effective in solving the agency problem. As such, ownership restructuring may be needed for China to successfully transform its SOEs to efficient modernized corporations and reform its overall economy. |
| Keywords: | executive compensation, firm performance, corporate governance, ownership structure, China, and transition economies |
| JEL: | M52 M12 J33 P31 P34 O16 G30 O53 G15 |
| Date: | 2005–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1767&r=sea |
| By: | Tetsuji Okazaki (Faculty of Economics, University of Tokyo) |
| Abstract: | This paper examines how professional corporate executives diffused among cotton spinning companies in prewar Japan, and analyzes the determinants as well as implications of the employment of professional executives. While simple scale variables such as paid-in capital and production did not correlate with employment of professional executives, those variables reflecting complexity of management, such as number of factories and dummy variable indicating integrated production, have positive correlation with it. At the same time, availability of managerial capability among owners negatively correlates with employment of professional executives. Also, we found that employment of professional executives had a positive effect on corporate profitability, after controlling for the endogeneity. |
| Date: | 2005–10 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2005cf382&r=sea |
| By: | K. Ali Akkemik (Nagoya University Graduate School of International Development, Nagoya, Japan) |
| Abstract: | This paper investigates the impact of the shifts of labor across sectors on aggregate productivity growth through a decomposition of aggregate productivity growth in Singapore over the period 1965-2002. The static shift-share analysis is utilized to for this purpose. The results show that the shifts of labor paid off well in terms of their contribution to labor productivity especially for manufacturing in the 1985 era which was characterized by interventionist labor market policies of the government. On the other hand, the impact of labor shifts is negative in the post-1985 era which is characterized by a more liberalized labor market. |
| Keywords: | shift-share analysis, Singapore, labor productivity |
| JEL: | C6 D5 D9 |
| Date: | 2005–10–17 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpge:0510005&r=sea |
| By: | Masaomi Kitagawa (Omniversal Development Institute) |
| Abstract: | East Asian nations are currently undertaking the future development of an economic community by creating a viable framework for closer cooperation and deeper integration. However, the intractable problem is that there are a lot of diversities and heterogeneity that have prevented the East Asian nations from reaching coordinated policies for the promotion of regional cooperation and combining efforts on integrating their economies with each other. This paper thus presents that a successful process of forthcoming regional integration on the economic side would accompany with strenuous efforts to create a common market among ASEAN, China, South Korea, and Japan by establishing a free trade area covering the entire region. As the two major countries in the region, in the arrangement, China and Japan would have centered roles in promoting economic cooperation in East Asia. However, it is practically impossible to decide either China or Japan is capable of taking the initiative in the development without providing various rationales for economic cooperation and examining economic challenges facing the both nations. In the development,, in addition, Japan’s agricultural policy could be defined as the essential part of assessing its regional and bilateral measures consistent with the rules of the WTO, in particular, GATT Article XXIV requirements that raise the problem of the concise interpretation of “substantially all the trade.” East Asian Financial Crisis of 1997-98 also serves as a catalyst in considering the issues of regional integration on the financial side, the principle of which is to sustain an economic recovery and minimize the risk of another crisis. The important point is how the East Asian nations foster a regional financial framework under ASESAN+3 in which there has been ongoing debates on the development. This paper thus discusses possible approaches to enhance regional financial cooperation and provides various rationales for developing regional financial schemes while examining Japan’s assistance measures shortly after the financial crisis, which became a significant step toward attaining the economic recovery of the crisis-affected countries and bringing the financial stability to the region. In order to sustain the economic growth in the region, the East Asian nations are currently considering the issue of monetary integration in the feasibility of introducing a common currency basket regime that is best understood as the willingness of jointly working toward a full currency union. The evidence supports my conclusion, while answering the question of how Japan should exercise its leadership in developing regional integration on both economic and financial sides, that the creation of the economic community resulting from the common market with the full currency union would bring the huge prosperity to the region. |
| Keywords: | regional integration, East Asia, Japan, FTA, poverty reduction, agriculture, WTO, GATT Article XXIV, substantially all the trade, East Asian Financial Crisis, ASEAN+3, monetary integration, |
| JEL: | F1 F2 |
| Date: | 2005–10–15 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0510003&r=sea |
| By: | Deepak Kumar (ICFAI University Press , Hyderabad,India) |
| Abstract: | The book encapsulates the ways and means of doing business with China, and the opportunities out there. It reveals how China has transformed itself for the investors by creating a friendly environment; but,nevertheless, cultural and social aspects must not be forgotten while dealing with them. The book is divided into four parts. These are: • The China Triangle, • Trading with China, • Investing in China and • Dealing with Chinese. This book on “China Triangle” encourages foreign businessmen to invest here, as it has gone through different economic reforms. China Triangle, here,stands for People’s Republic of China, Taiwan and Hong Kong. These countries are now united commercially and their people are coming together to do business. Examples of this are: • The Chinese town of Shenzhen, with skyline crammed with office towers, has been financed by Hong Kong banks. • Hong Kong firms employ five million workers in South China and 70% of the foreign investment flows into Guangdong province. • Taiwan is upgrading its production technology while Hong Kong is improving its finances, transportation,and telecommunication infrastructure. • People’s Republic of China is expanding its share in export markets and as per recent data of 2005, China already has trade surplus. |
| Keywords: | China,Business Environment,Asia |
| JEL: | F1 F2 |
| Date: | 2005–10–19 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpit:0510006&r=sea |