nep-sea New Economics Papers
on South East Asia
Issue of 2005‒11‒09
eighteen papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Korea's Fading Economic Miracle 1990-97 By Harvie, Charles; Lee, Hyun-Hoon
  2. Macroeconometric Modelling: Approaches and Experiences in Developing Countries By Valadkhani, Abbas
  3. The Impact of Unilateral and Regional Trade Liberalisation on the Intra-ASEAN 5 Founding Nations' Exports and Export-GDP Nexus By Jayanthakumaran, Kankesu; Sanidas, Elias
  4. Donor Influence in MDBs: the Case of the Asian Development Bank By Kilby, Christopher
  5. The effects of subsidies on the cost structure of Japanese water supply organizations By Takuya Urakami
  6. The Building of Environmental Geographic Information System for Supporting Environmental Policymaking in Korea By Minki Bae; Deokho Cho; HongSuk Um; Dongho Shin
  7. A Study of Dynamic Relationship between Housing Values and Interest Rate in the Korean Housing Market By Deokho Cho; Seungryu Ma
  8. Backcasting energy saving and CO2 emission reductions by using feebates system in Japan By Keiko Hirota; Minato Kiyoyuki; Kii Masanobu
  9. Regional Specialization via Differences in Transport Costs: An Economic Geography Approach By Hajime Takatsuka; Dao-Zhi Zeng
  10. The Construction of a 47-Region Inter-regional Input-Output Table, and Inter-regional Interdependence Analysis at Prefecture Level in Japan By Yoshifumi Ishikawa; Toshihiko Miyagi
  11. Rural-Urban Economic Disparities among China’s Elderly By Maria Manuela Nêveda Da Costa; Jianjun Ji
  12. Growth of GRP in Chinese Provinces. A Test for Spatial Spillovers. By Krister Sandberg
  13. The Kina Model. A tool for exploring the spatial population development in China by large scale micro simulation By Peder Axensten; Zhongxin Chen; Shenghe Liu
  14. The Role of Multinational Corporations in Metropolitan Innovation Systems – Empirical Evidence from Europe and South-East Asia By Javier Revilla Diez; Martin Berger
  15. Has world poverty really fallen during the 1990s? By Sanjay G. Reddy; Camelia Minoiu
  16. Persistence Characteristics of the Chinese Stock Markets By Cornelis A. Los; Bing Yu
  17. China’s banking reform: An assessment of its evolution and possible impact By Alicia Garcia-Herrero; Sergio Gavila; Daniel Santabarbara
  18. Asset prices and capital accumulation in a monetary economy with incomplete markets By sunanda roy

  1. By: Harvie, Charles (University of Wollongong); Lee, Hyun-Hoon
    Abstract: By the late 1980s Korea's interventionist and export-oriented development model had contributed to a number of serious structural weaknesses in the economy. Ongoing government involvement in the banking and corporate sectors, weak prudential supervision of financial institutions, and restricted financial market and corporate competition created moral hazard, as banks and corporates believed they would not be held accountable for their actions due to their close relationship with government. This resulted in financial sector risk mismanagement and highly leveraged growth of the chaebols. After 1988, when the new democratically elected civilian administration removed long-standing restrictions on union activity, rapid wage growth, in excess of productivity gains, eroded profitability. These structural weaknesses, and policy errors and mismanagement, made Korea increasingly vulnerable to external shocks during the 1990s. In mid 1995, a rapid depreciation of the Japanese yen and a world semi-conductor glut and price fall provided the trigger for a rapid slowdown in exports and industrial output, and an unprecedented wave of chaebol bankruptcies that undermined the solvency of financial institutions. Korea's long period of sustained economic growth, low inflation, strong investment and balanced budgets had lulled policy makers into complacency. They failed to act decisively to tackle the growing structural weaknesses. Korea's high exposure to short term foreign debt and loss of foreign exchange reserves through a vain and unsustainable attempt to defend the won further undermined foreign investor and creditor confidence. This paper discusses in some detail these developments and their contribution to the financial and economic crisis experienced by the country during 1997-98. It also identifies key lessons for countries contemplating similar rapid development, and key warning signs that need to be heeded to avoid similar happenings to that which occurred in Korea.
    Keywords: South Korea, export-oriented development model, structural weaknesses, financial and economic crisis
    Date: 2005
  2. By: Valadkhani, Abbas (University of Wollongong)
    Abstract: This paper selectively reviews various approaches of macroeconometric modelling and highlights some important lessons from more than half a century of model-building particularly in the context of Asian countries. Addressing several issues discussed in this paper can improve the use of macroeconometric models (MEM) in forecasting and policy analysis in the foreseeable future. This survey shows that most MEMs in developing countries are either becoming smaller in size or not being subject to a thorough diagnostic investigation. In the specification of models one should consider the interplay among macroeconomic policies of different countries via international trade and global financial markets. It is argued that the Project Link and the Fair multi-country model are two initiatives in the right direction. It also appears that with advancement of econometric "know-how", the disparity of opinions between advocates and critics of macroeconometric modelling can be narrowed.
    Keywords: Macroeconometric modelling, Asian Developing Countries
    JEL: B23 C52 C51
    Date: 2005
  3. By: Jayanthakumaran, Kankesu (University of Wollongong); Sanidas, Elias (University of Wollongong)
    Abstract: This paper is differentiated from most previous studies in that it uses intra-ASEAN's (of the 5 founding counties) historical data and it assesses both exports and the export-GDP nexus by isolating the following three different historical policy interventions: the introduction of Preferential Trade Agreement (PTA) in 1977, the unilateral liberalisation following the severe recession of the mid-1980s and the ASEAN Free Trade Area (AFTA) formation in 1992. Our findings indicate that the ASEAN-5 countries' economies are moving together through time and emerged as a powerful integrated area as a consequence of all of the above three interventions. Unilateral liberalisation and ASEAN regionalism are complementary with each other. The ASEAN's story is unique and relies on both outward orientation and positive aspects of regionalism.
    Keywords: EASEAN-5, Exports, Export-GDP nexus, Trade Liberalisation, Intervention Time Series, Integration
    JEL: F15 F13 C4 O4
    Date: 2005
  4. By: Kilby, Christopher (Vassar College Department of Economics)
    Abstract: This paper explores the influence of Japan and the United States over the geographic distribution of Asian Development Bank (ADB) funds. Although nominally an independent, multilateral organization, the ADB is widely regarded as bowing to the interests of its two most influential donors. Estimation using panel data for less developed Asian countries from 1968 to 2002 reveals significant donor influence with inconsistent weight placed on humanitarian criteria given limited funding for the region’s largest countries, China and India. Comparing the results with research on World Bank loan allocation suggests donor interests are more important in the ADB. This finding justifies the existence of regional development banks on political grounds but calls into question their relative merits on economic grounds.
    Date: 2005–08
  5. By: Takuya Urakami
    Abstract: The purpose of this study is to identify the effects of subsidies on the cost structure of Japanese water supply organizations by estimating the translog cost function. Geographical conditions, such as network density and water sources, are also controlled in this model. The empirical results indicate that low network density, lack of own water sources and increasing subsidies lead to higher costs. It has also been found that subsidies have caused wasteful use of labor, capital and other input factors, and have diminished scale economies.
    Date: 2004–08
  6. By: Minki Bae; Deokho Cho; HongSuk Um; Dongho Shin
    Abstract: The goal of this study is to build a geographic information system for environmental policymaking. To achieve this goal, this study first surveys the local environment status. Based upon the collected environmental data, it forecasts the future environmental status of each city in Gyeongbuk province and generates a geo-referencing code. Finally, by using these data, it builds up a future environmental geographic information system for supporting environmental policymaking. This study consists of three major parts: 1) developing integrated environmental indicators, 2) establishing an environmental capacity database on the local level, 3) building up an environmental capacity geographic information system, and 4) making an environmental policy monitoring system. The results of this study will contribute to establish a warning system to prevent an excess of environmental capacity. They will also provide the framework and standard for integrating various environmental databases with a local environmental and geographic information system. Key words: Environmental indicators, geographic information system, geo-coding and geo-referencing, environmental policy
    Date: 2004–08
  7. By: Deokho Cho; Seungryu Ma
    Abstract: The goal of this study is to identify the long-term relationship between housing value and interest rate in the Korean housing market, using the Cointegration Test and Spectral Analysis. The result shows the long-term negative (-) equilibrium relationship between housing values and interest rate. Moreover, the Granger Causality Test for confirming the short-term dynamic relationship between these variables notes the one-way causality from interest rate to the change rate of housing and the transfer function model certifies concretely the causal structure of this relationship. The result of this study suggests that the interest rate adjustment policy in the Korean housing market can work very effectively and it will contribute to forecast the change of future housing values hereafter. Keywords: Dynamic relationship; Housing value; Interest rate; Cointegration and spectral analysis; Long term equilibrium
    Date: 2004–08
  8. By: Keiko Hirota; Minato Kiyoyuki; Kii Masanobu
    Abstract: After the Kyoto Conference (COP3), the Japanese transport sector was required to reduce carbon dioxide (CO2) emissions by 16% by 2010. The Japanese government has decided to improve the fuel economy standard in 2010 by improving it by an average of 22.8%. However, Japanese consumers tend to prefer heavier passenger cars such as four-wheel drive or recreational vehicles. Because of the difficult target of COP3, environmental policy should involve not only automotive technologies but also non-technical measures. Since Japanese vehicle taxes are expensive compared to other OECD countries, we would like to introduce the “feebate”, a word composed from “fee” and “rebate”, as a “Green Tax” at the acquisition stage. The feebate system charges a fee for less fuel-efficient vehicles and refunds for vehicles more fuel efficient than the fuel efficiency standard. This system is a market based alternative by fuel efficiency standards so that it can be tax neutral. Acquisition tax does not affect to environmental sustainability. Since social marginal cost has increased more and more, it is not always realistic to impose all the costs at the motoring tax level. The feebate system could partially share the social marginal cost and might mitigate the rebound effect at the motoring stage. We use the data set from 1995-2001 on fuel efficiency by vehicle type and the fuel efficiency standards of 1995. The contribution of this paper will be to propose a combination of feebate rate and CO2 emission reduction by vehicle gross weight group.
    Date: 2004–08
  9. By: Hajime Takatsuka; Dao-Zhi Zeng
    Abstract: The regional specialization via differences in transport costs are observed in Japanese manufacturing industries. Concretely, industries with high transport costs for their products, such as iron and steel, petroleum and coal products, remained close to the core region while industries with low transport costs, such as electrical machinery, precision instruments, have relocated to the periphery region. The purpose of this paper is to give a theoretical foundation for this fact by use of a new economic geography model with multiple industries. The urban costs and congestion are explicitly included in the model. We obtain the following results. First, if congestion does not exist, at most one industry disperses when transport and commuting costs are sufficiently small. Furthermore, regional specialization occurs in which industries having higher adjusted transport costs (which are defined as the ratios of transport costs to the number of varieties) than that of the dispersing industry agglomerate in one region. Second, in the case of strong congestion, plural industries might disperse even if transport and commuting costs are small, but as the degree of congestion decreases, the location will change to complete regional specialization. Keywords: regional specialization, economic geography, transport costs, urban costs, congestion.
    Date: 2004–08
  10. By: Yoshifumi Ishikawa; Toshihiko Miyagi
    Abstract: In Japan, We can use many input-output tables for regional economic analysis. However, Most of them are not inter-regional input-output tables but intra-regional input-output tables. Therefore, these do not enable analysis in consideration of interregional interdependence except for a famous nine regions covering the whole of Japan by MITI etc. In this study, we attempted to estimate a 47 region-interregional input-output table at the prefecture level covering the whole of Japan. The hybrid approach of constructing regional input-output tables was adopted in this 47 region-interregional input-output study. First of all, all intra-regional input-output tables at prefecture level were prepared. We can use intra-regional input-output tables of all prefectures in Japan from 1990. The second step is the estimation of interregional trade coefficients. When inter-regional input-output tables are constructed, Estimation of interregional trade coefficients is very important. In this study, we propose a method for estimation of interregional trade using a distribution census and some data. And the interregional trade coefficients were adjusted by using a new iterative method so that the sum total of the total output of 47 regions might suit the amount of total output of Japan. Finally, a 47 interregional input-output table was compiled using tables of 47 all prefectures and the interregional trade coefficients. And also, this paper presents some regional economic analysis using a 47 region-interregional input-output table. We can observe the relation between transportation network and inter-regional economic linkage at prefecture level.
    Date: 2004–08
  11. By: Maria Manuela Nêveda Da Costa; Jianjun Ji
    Abstract: Some of the most controversial effects of China's post-1978 economic reforms have been on regional income disparities and on the divide between urban and rural development. How important are those income disparities? And how do they affect the elderly, who are perhaps the most vulnerable to the changes brought by China’s transition? What is the government’s role in providing income support? This paper examines the rural-urban disparities in income, expenditures, and government support among the elderly in China. We test for significant differences in levels and sources of income and in types of expenditures using a nationwide survey on rural and urban elderly conducted by China’s Elderly Scientific Research Center in 1992. This survey consists of two separate sets of responses, one for urban areas (9,889 respondents) and the other for rural areas (10,194 respondents), and provides demographic, socioeconomic, and health characteristics of the elderly. In addition, we propose to investigate the type and level of government income support programs at the local and state level. The findings are evaluated and policy implications discussed in the context of China’s transition to a market economy and choice of development strategies.
    Date: 2004–08
  12. By: Krister Sandberg
    Abstract: This paper examines the provincial pattern of growth in China during the period 1985–2000, testing the hypothesis that provinces with similar growth rates are more spatially clustered than would be expected by chance. The provincial economic growth is explained by the distribution of industrial enterprises, foreign direct investment, infrastructure, and governmental preferential policies. The neoclassical hypothesis of convergence is also tested. Indications of unconditional convergence does occur during the periods 1985–2000 and 1985–1990. In addition, conditional convergence is found during the sub-period 1990–1995. Evidence of spatial dependence between adjacent provinces has also been established, and in the econometric part, solved by a spatial lag, or alternatively a spatial error term, in the growth equation. Keywords: GRP-growth, Chinese provinces, Spatial dependence Classification [JEL]: O18, R11, R12
    Date: 2004–08
  13. By: Peder Axensten; Zhongxin Chen; Shenghe Liu
    Abstract: This paper is on work in progress. The China Model exists and runs fast and usually reliably although it still has very simple behavioural modules that do not produce very reliable results. The purpose of the paper is to present the structure, content, and current state of validity of the model.
    Date: 2004–08
  14. By: Javier Revilla Diez; Martin Berger
    Abstract: Using firm-level survey data from Barcelona, Stockholm, Vienna in Europe and Singapore, Penang (Malaysia) and Bangkok in South-East Asia the paper enquires into the different R&D and innovation behaviour of multinational and local companies in these Metropolitan Regions. Scrutinizing a set of input, throughput and output indicators as well as information on cooperation characteristics, we try to evaluate a) if the spatial pattern of more (intense) innovation activity in Europe when compared to South-East Asia is still valid; and b) if there are reasons to believe that R&D units of multinational corporations in Europe are mainly concerned with the enhancement of the knowledge base and the development of future competitiveness by tapping into localized knowledge and using the particular host regions’ innovation systems, while, on the other hand, MNCs in South-East Asia use R&D to support existing production facilities in order to exploit an existing competitive advantage. We are able to show that there is still a major gap in the innovation performance between South-East Asia and Europe and that there are indeed indications that R&D units in Europe are more orientated towards the augmentation of the company’s knowledge base.
    Date: 2004–08
  15. By: Sanjay G. Reddy (Department of Economics, Barnard College, Columbia University); Camelia Minoiu (Department of Economics, Columbia University)
    Abstract: We evaluate the claim that world consumption poverty has fallen during the 1990s in light of alternative assumptions about the extent of initial poverty and the rate of subsequent poverty reduction in China, India, and the rest of the developing world. We assess the extent of poverty using two indicators: the aggregate poverty headcount and the poverty headcount ratio, and consider two international poverty lines that are widely used ($1.08/day and $2.15/day 1993 PPP). We find that under some of the assumptions considered, world poverty has risen. We conclude that, because of uncertainties in relation to the extent and trend of poverty in China, India, and the rest of the developing world, world poverty may or may not have increased. The extent of the increase or decrease in world poverty is critically dependent on the assumptions made. Our conclusions suggest the importance of improving the quality of global poverty statistics.
    Keywords: world poverty, sensitivity analysis, China, India
    JEL: I32 I30 O53
    Date: 2005–09–07
  16. By: Cornelis A. Los (EMEPS Associates, Inc.); Bing Yu (Kent State University, Graduate School of Management)
    Abstract: This paper identifies such fundamental characteristics as the lack of ergodicity, stationarity, and independence, and it identifies the degree of initial persistence of the Chinese stock markets when they were more regulated. The index series are from the Shanghai (SHI) stock market and Shenzhen A-shares (SZI) and B-shares (SZBI) stock markets, before and after the various deregulations and reregulations. Accurate and complete signal processing methods are applied to the complete series and to their sub-periods. The evidence of lack of stationarity and ergodicity can be ascribed to two causes: (1) the initial interventions in these stock markets by the Chinese government by imposing various daily price change limits, and (2) the changing trading styles in the course of the development of these emerging stock markets, after the Chinese government left these equity markets to develop by themselves. By computing the markets' monofractal Hurst exponents (and its accuracy range with a new statistic), using wavelet multiresolution analysis (MRA), we identify the markets' subsequent degrees of persistence. The empirical evidence shows that SHI, SZI, and SZBI are moderately persistent with Hurst exponents slightly greater than the Fickian 0.5 of the Geometric Brownian Motion. It also shows that these stock markets were considerably more persistent before the deregulations, but that they now move much more like geometric Brownian motions, i.e., efficiently. Our results also show that the Chinese stock markets are gradually and properly integrating into one Chinese stock market. Our results are consistent with similar empirical findings from Latin American, European, and other Asian emerging financial markets.
    Keywords: Long-term dependence, degrees of persistence, Hurst exponent, wavelet multiresolution analysis, Chinese equity markets
    JEL: C15 C33 C53 G13 G15 G18
    Date: 2005–08–16
  17. By: Alicia Garcia-Herrero (Bank of Spain); Sergio Gavila (Bank of Spain); Daniel Santabarbara (Bank of Spain)
    Abstract: The Chinese banking system, characterized by massive government intervention, poor asset quality and low capitalization, has started a reform process based on three main pillars: (i) bank restructuring, through the cleaning-up of non-performing loans and public capital injections, particularly in the four largest state-owned banks; (ii) financial liberalization, with the gradual flexibilization of quantity and price controls, the opening-up to foreign competition and cautious steps toward capital account liberalization; and (iii) strengthened financial regulation and supervision, coupled with efforts to improve corporate governance and transparency. Although the reform is still ongoing, our preliminary assessment indicates that changes are needed for the reform to be fully successful. Asset quality has improved, particularly in the recapitalized banks, but there is a high risk of a new build-up of non performing loans. Capitalization has increased in the largest banks, as a consequence of the government capital injections, but it generally remains low and profitability has fallen even further. China’s huge financing needs, to maintain high economic growth, and its commitment to fully open up its banking system to foreign competition urgently require a more comprehensive and time-bound strategy, with a long-term vision of the desired structure of the Chinese banking system. Bank recapitalization should be completed immediately, not only to ensure bank soundness, but also to increase profitability, which could be affected negatively as competition increases with full financial liberalization. Bank recapitalization, however, needs to be accompanied by a radical improvement in corporate governance, which would clearly be facilitated by a change in the property structure.
    Keywords: Chinese financial system, financial reform, bank restructuring, financial liberalization, bank regulation and supervision.
    JEL: E44 E66 G2 G21
    Date: 2005–08–22
  18. By: sunanda roy (drake university)
    Abstract: The paper studies asset prices and capital accumulation in a monetary economy with non-diversifiable idiosyncratic risks (incomplete markets). A government issued unbacked currency is introduced into agent's preferences in a dynamic GEI (General Equilibrium with Incomplete market) model with CARA preferences and normal disturbances. Closed form expressions for equlibrium allocations and prices are derived under finite and infinite horizons. The paper addresses several monetary issues. In particular, money is shown to be neutral but not superneutral at the steady state. The rate of inflation is shown to adversely affect the steady state capital stock under some situations. Finally the Friedman rule is shown to be non-optimal for some economies.
    JEL: C6 D5 D9
    Date: 2005–08–09

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