nep-sea New Economics Papers
on South East Asia
Issue of 2005‒11‒12
twelve papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Financial Market in the Laboratory, an Experimental Analysis of some Stylized Facts By Andrea Morone
  2. On the Rationale of Bank Lending in Pre-Crisis Thailand By Menkhoff, Lukas; Chodechai Suwanaporn, Chodechai
  3. Estimates of the Long-run Economic Growth of Taiwan Based on Revised SNA By Toshiyuki Mizoguchi
  4. The International Allocation of R&D Activity by US Multinationals: The East Asian Experience in Comparative Perspective By Prema-chandra Athukorala; Archanun Kohpaiboon
  5. Deposit Insurance and Depositor Discipline: Direct Evidence on Bank Switching Behavior in Japan By Noriko Inakura; Satoshi Shimizutani; Ralph Paprzycki
  6. Socially Responsible Investment in Japanese Pensions By Henry Hongbo Jin; Olivia S. Mitchell; John Piggott
  7. Can IT be Japan%u2019s Savior? By Fumio Hayashi; Koji Nomura
  8. Income Disparity and Economic Growth: Evidence from China By Duo Qin; Marie Anne Cagas; Geoffrey Ducanes; Xinhua He; Rui Liu; Shiguo Liu
  9. Regional Trade Agreements By Richard Pomfret
  10. The shoe industry of Marikina City, Philippines: a developing country cluster in crisis By Allen J. Scott
  11. Job Security Laws and Structural Change in the Japanese Labor Market By Kenji Azetsu; Mototsugu Fukushige
  12. How Homogenous are Currency Crises? A Panel Study using Multiple-Response Models By Tassos Anastasatos; Ian R. Davidson

  1. By: Andrea Morone
    Abstract: This paper purports to provide experimental evidence explaining a number of stylized facts associated with the behaviour of financial returns, in particular, the fat tailed nature of their distribution and the persistence in their volatility. By means of a laboratory experiment, we will investigate the effect of quantity and quality of information, present in a financial market, upon its stylized facts, showing how both quality and quantity of information might have an impact on volatility clustering and the emergence of fat tail returns.
    Keywords: herd behaviour, fat tail volatility clustering
    JEL: C91 D82 D83
    Date: 2005–11
  2. By: Menkhoff, Lukas; Chodechai Suwanaporn, Chodechai
    Abstract: Evidence from credit files is provided to examine bank lending determinants of Thai commercial banks. Their lending practice follows reasonable patterns as a standard set of variables, including indirect risk variables, explains much of the variance in interest rate spread. Reflecting institutional differences with mature markets, we find higher importance of relationship banking and risk control via credit availability. Information about later default reveals prudent relationship lending. However, banks could have made better use of available information about borrowers' riskiness. These findings do not support a general verdict of bad banking but indicate room to improve lending decisions.
    Keywords: Financial system, bank lending, relationship lending, financial crises, emerging economies, Thailand
    JEL: G21 O16
    Date: 2005–11
  3. By: Toshiyuki Mizoguchi
    Date: 2005–10
  4. By: Prema-chandra Athukorala; Archanun Kohpaiboon
    Abstract: This paper examines patterns and determinants of overseas R&D expenditure of MNEs, with emphasis on the East Asian experience, using a new panel dataset relating to US-based manufacturing MNEs over the period 1990-2001. It is found that inter-country differences in R&D intensity of operation of US MNE affiliates are fundamentally determined by the domestic market size, overall R&D capability and cost of hiring R&D personnel. The impact of domestic market orientation of affiliates on R&D propensity varies among countries depending on their stage of global economic integration. Intellectual property protection seems to matter largely for mature economies with complementary endowments. There is no evidence to suggest that financial incentives have a significant impact on inter-country differences in R&D intensity when controlled for other relevant variables. Nor is there a statistically significant relationship between the size of the capital stock of MNEs and R&D intensity of their operation across countries. Overall, our findings serve as a caution against paying too much attention by host country governments on turning MNEs affiliates into technology creators as part of their foreign direct investment policy.
    Date: 2005–09
  5. By: Noriko Inakura; Satoshi Shimizutani; Ralph Paprzycki
    Abstract: As Japan's financial system moves toward a more market oriented one, depositor discipline is expected to play a larger role in the monitoring of the country's banks. Relying on detailed survey data on households' bank switching behavior matched with banks' financial data, we examine households' response to bank risk and different deposit insurance schemes. We find that bank switching in response to risk was more frequent in 2001 than in 1996 and that households' choice of bank provides an adequate reflection of banks' financial health. We also examine the determinants of households' knowledge of the deposit insurance scheme and find that income, the amount of households' financial assets, and educational attainment are all significant factors. What is more, households' extent of knowledge regarding the deposit insurance scheme was an important determinant of bank switching behavior. The results suggest that depositor discipline appears to work and could play an important supplementary role in monitoring the banking sector.
    Keywords: depositor discipline, deposit insurance, pay-off, dopositor-level data
    JEL: G21 G32
    Date: 2005–10
  6. By: Henry Hongbo Jin; Olivia S. Mitchell; John Piggott
    Abstract: As the level of retirement-related assets has grown, so too has public and private interest in so-called "Socially Responsible Investment" (SRI), an investment strategy that employs criteria other than the usual financial risk and return factors when selecting firms in which to invest. This study evaluates whether SRI indexes would alter portfolio risk and return patterns for the new defined contribution pension plans currently on offer in Japan. We conclude that SRI funds can be included as an option, albeit with some cost; consequently, mandatory investment in SRI portfolios cannot reasonably be justified.
    JEL: G11 G20 G23
    Date: 2005–11
  7. By: Fumio Hayashi; Koji Nomura
    Abstract: This paper constructs a multi-sector model to take explicit account of the very sharp change in the relative price between non-IT and IT goods. The model is calibrated to the Japanese economy, and its solution path from 1990 on is compared to Japan's macroeconomic performance in the 1990s. Compared to the one-sector analysis of Japan in the 1990s in Hayashi and Prescott (2002), our model does slightly better or just as well in accounting for Japan's output slump and does worse in accounting for the capital-output ratio. We also show that, to revive a 2% long-term growth in percapita GDP, Japan needs to direct 10% of private total hours to the IT sector.
    JEL: E2 O4 O5
    Date: 2005–11
  8. By: Duo Qin (Queen Mary, University of London); Marie Anne Cagas (Asian Development Bank); Geoffrey Ducanes (Asian Development Bank); Xinhua He (Chinese Academy of Social Sciences); Rui Liu (Chinese Academy of Social Sciences); Shiguo Liu (Chinese Academy of Social Sciences)
    Abstract: This paper carries out a pilot empirical study on how income inequality affects growth and the macro economy by means of incorporating panel data information into a macro-econometric model. China is used as the pilot field. Provincial urban and rural household data are used to construct inequality measures, which are then used to augment household consumption equations in the ADB China model. Model simulations are performed to study the effect of inequality on GDP growth and its sectoral components. Results show that inequality is a robust explanatory variable of consumption and that the way inequality develops over time carries certain negative consequences on GDP and sectoral growth.
    Keywords: Income inequality, Growth, Econometric model, China
    JEL: R11 E21 D3 C5 C2
    Date: 2005–11
  9. By: Richard Pomfret (University of Adelaide)
    Abstract: This paper reviews the evolution of thinking about regional trade agreements (RTAs) and the policy developments reflected in three waves of RTAs during the last half century. It rejects claims, based on number of RTAs notified to the WTO, that RTAs are today more prolific than ever. Desirable and undesirable features of RTAs can be identified, but the central message of the theory of second-best about the ambiguity of outcomes remains valid. Describing many RTAs as free trade agreements distorts the meaning of “free trade” and deeper integration in some regions undermines use of the nation state as the central unit of analysis; both make it difficult to determine whether active RTAs are stepping stones or stumbling blocks to improved resource allocation.
    Keywords: trade policy; regional trade agreements
    JEL: F13 F15 F02
    Date: 2005–11–03
  10. By: Allen J. Scott (UCLA)
    Abstract: I initiate the discussion with a few general remarks on industrial clusters and commodity chains. I describe the main features of the shoe industry in the Philippines. The core of the industry is located in Marikina City in the northeast of the Manila Metropolitan Area. I provide a detailed account of the internal structure and changing fortunes of this cluster. The deeply-rooted failures of the cluster since the early 1990s are pinpointed. I show that these can be directly related to the liberalization of the Filipino economy, and the concomitant increase in Chinese-made shoes on domestic markets. Various private and public responses to the crisis are described and evaluated. I argue that as helpful as many of these responses may be, their overall impact is likely to remain limited. I enumerate a series of possible policy options, but I also emphasize the high risks of failure. I try, in particular, to provide a developmental scenario based on cluster upgrading and intensified export activity.
    Keywords: shoe industry, industrial districts, regional development, clustering, agglomeration
    JEL: R
    Date: 2005–11–07
  11. By: Kenji Azetsu (Graduate School of Economics, Kobe University); Mototsugu Fukushige (Graduate School of Economics, Osaka University)
    Abstract: There are a number of indications that Japanese job security laws have been relaxed since the end of the 1990s. The purpose of this paper is to establish causality between job security laws and firing costs in the Japanese labor market. The analysis first investigates when and how firing costs changed, and then compares the timing of these changes in firing costs with those of job security laws. The results indicate that gradual changes in firing costs began in about 1992, lagging one or two years behind the bursting of the bubble economy, while job security laws started to change towards the end of the 1990s.
    Keywords: Adjustment costs for labor; Gradual switching model; Job security laws
    JEL: J23 J32
    Date: 2005–11
  12. By: Tassos Anastasatos (Dept of Economics Univ. of Loughborough); Ian R. Davidson (Business School Univ. of Loughborough)
    Abstract: This paper presents formal evidence that currency episodes display heterogeneity in terms of their evolution, their impact on the inflicted economy and their links with financial, political and macroeconomic fundamentals. Limited-dependent variable models for ordered and unordered outcomes along with their heteroskedastic and random effects extensions are applied on a large panel of data comprising 40 years of monthly observations on 23 developed countries. Heterogeneity, complemented by indications of self-fulfilling expectations and noise, suggest that time and region specific predictive approaches and policy responses are more useful than trying to base analysis and policy decisions on more general patterns. Results are established with formal specification tests.
    Keywords: Currency crises; speculative pressure; exchange rate; devaluation; Limited-dependent variable models.
    JEL: F31 C23 C25 E44 G15
    Date: 2004–12

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