nep-sea New Economics Papers
on South East Asia
Issue of 2006‒05‒20
eight papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Building Capacity to Monitor Water Quality: A First Step to Cleaner Water in Developing Countries By Jim Hight; Grant Ferrier
  2. Economic Returns to Communist Party Membership: Evidence from Urban Chinese Twins By Hongbin Li; Pak Wai Liu; Junsen Zhang; Ning Ma
  3. Ideological Reform and Political Legitimacy in China: Challenges in the Post-Jiang Era By Heike Holbig
  4. Dynamic conditional correlation analysis of financial market interdependence: An application to Thailand and Indonesia By Kuper, Gerard H.; Lestano
  5. Technical Change and Total Factor Productivity Growth for Chinese Provinces: A Panel Data Analysis By Shiu, Alice; Heshmati, Almas
  6. Asymmetry of Shocks and Convergence in Selected Asean Countries: A Dynamic Analysis By Carlos Cortinhas
  7. The International CAPM and a Wavelet-Based Decomposition of Value at Risk By Viviana Fernandez
  8. Emerging Market Bond Returns – An Investor Perspective By D. Johannes Juttner; David Chung; Wayne Leung

  1. By: Jim Hight; Grant Ferrier
    Abstract: One of the key challenges to ensuring adequate supplies of fresh water and sanitary wastewater systems is to build the capacity of various stakeholders to manage and deliver water and sanitation services. One element of such capacity building is technological and includes the wide deployment of water quality monitoring and analysis equipment. This report explores four cases in China, India, Malaysia, and Chinese Taipei, where water-quality monitoring and protection capacity has been improved through the use of imported water-quality monitoring equipment combined with indigenous implementation.
    Keywords: trade, developing countries, environmental goods, Malaysia, India, water quality, China, Chinese Taipei
    Date: 2006–05–10
  2. By: Hongbin Li (Chinese University of Hong Kong); Pak Wai Liu (Chinese University of Hong Kong); Junsen Zhang (Chinese University of Hong Kong and IZA Bonn); Ning Ma (Johns Hopkins University)
    Abstract: This paper estimates the returns to membership of the Chinese Communist Party using unique twins data we collected from China. Our OLS estimate shows that being a Party member increases earnings by 10%, but the within-twin-pair estimate becomes zero. One interpretation of these results is that the OLS Party premium is due to omitted ability and family background. This interpretation would suggest that Party members fare well not because of their special political status per se, but because of the superior ability that made them Party members. The estimates are also consistent with an alternative interpretation that Party membership not only has its own effect but also has an external effect on the sibling.
    Keywords: twins, communist party membership, China
    JEL: J31 O15 P26
    Date: 2006–05
  3. By: Heike Holbig (GIGA Institute of Asian Studies)
    Abstract: As a Socialist country undergoing rapid social and economic transition, China presents a revealing case study on the role of ideology in the process of institutional change. Based on Douglass North’s theory of institutional change and on David Beetham’s theory of political legitimation, this paper argues that recent ideological reforms have been a crucial factor in sustaining the legitimacy of Communist party rule. Ideological change is conceived as a path-dependent process which helps to stabilize the social perception of transition and to frame the party’s modernization achievements. At the same time, the dominant role of ideology makes the Chinese party-state, despite its economic success, more vulnerable to legitimacy crises compared to other authoritarian regimes.
    Keywords: Institutional change, political legitimacy, ideology, Socialism, Communism, China
    Date: 2006–03
  4. By: Kuper, Gerard H.; Lestano (Groningen University)
    Abstract: This paper examines the dynamic linkages among financial markets in Thailand and Indonesia. In particular, we focus on the cross-border relationship in individual markets and on the relationship between finan- cial markets within each country. We find that while tight monetary policy pursued by Thailand authorities helped to defend the exchange rate at the outbreak of the financial crisis, it had little consequences for Indonesia at the end of 1998. The correlations between countries within each of the financial market reveals a certain degree of interde- pendence among countries, which is lower during crises.
    Date: 2006
  5. By: Shiu, Alice (Hong Kong Polytechnic University); Heshmati, Almas (The Ratio Institute)
    Abstract: We present in this paper the panel econometrics estimation approach of measuring the technical change and total factor productivity (TFP) growth of 30 Chinese provinces during the period of 1993 to 2003. The random effects model with heteroscedastic variances has been used for the estimation of the translog production functions. Two alternative formulations of technical change measured by the single time trend and the general index approach are used. Based on the measures of technical change, estimates of TFP growth could be obtained and its determinants were examined using regression analysis. The parametric TFP growth measure is compared with the non-parametric Solow residual. TFP has recorded positive growth for all provinces during the sample period. Regional breakdown shows that the eastern and central regions have higher average TFP growth when compared with the western region. Foreign direct investment (FDI) and information and communication technology (ICT) investment are found to be significant factors contributing to the TFP difference. While these two factors are found to have significant influence on TFP, their influence on production is relatively small compared to traditional inputs of production.
    Keywords: technical change; TFP growth; provinces; China; ICT; FDI; infrastructure
    JEL: C23 D24 E22 O18 O47
    Date: 2006–05–12
  6. By: Carlos Cortinhas (Universidade do Minho - NIPE)
    Abstract: This paper aims to investigate whether structural shocks among ASEAN countries are becoming more symmetrical over time, thus indicating whether this region is becoming better prepared to introduce a common monetary policy. For that purpose a dynamic space-state model that complements the conventional Structural VAR models used in the existing literature was estimated by using the Kalman filter so that the evolution of the degree of shock symmetry and, therefore, the evolution in the degree of convergence could be identified over time, distinguishing between a country’s convergence with a regional partner and a more general trend of convergence with the rest of the world. The results showed that in the majority of cases there has been an increase in the degree of convergence of demand shocks in recent years. More importantly, it also showed an increase in divergence in supply shocks for most cases since the beginning of the 90’s even when taking into account the Asian Financial Crisis. This is especially true for the periphery countries suggesting that the Philippines and Thailand are not only not converging but actually diverging from the core group. These results have important implications for the prospects of the creation of a common monetary policy in the region.
    Keywords: Optimum currency areas; Monetary integration; Asymmetric shocks; Convergence; Asean.
    JEL: F15 F33 E42
    Date: 2006
  7. By: Viviana Fernandez
    Abstract: In this article, we formulate a time-scale decomposition of an international version of the CAPM that accounts for both market and exchange-rate risk. In addition, we derive an analytical formula for time-scale value at risk and marginal value at risk (VaR) of a portfolio. We apply our methodology to stock indices of seven emerging economies belonging to Latin America and Asia, for the sample period 1990-2004. Our main conclusions are the following. First, the estimation results hinge upon the choice of the world market portfolio. In particular, the stock markets of the sampled countries appear to be more integrated with other emerging countries than with developed ones. Second, value at risk depends on the investor’s time horizon. In the short run, potential losses are greater than in the long run. Third, additional exposure to some specific stock indices will increase value at risk to a greater extent, depending on the investment horizon. Our results go in line with recent research in asset pricing that stresses the importance of heterogeneous investors.
    JEL: C22 G15
    Date: 2006–05
  8. By: D. Johannes Juttner (Department of Economics, Macquarie University); David Chung (Department of Economics, Macquarie University); Wayne Leung (Department of Economics, Macquarie University)
    Abstract: The last twenty five years provided international investors in sovereign bonds of emerging market countries with a colourful experience consisting of several defaults that resulted in protracted, frustrating and – most importantly – costly salvage operations. It therefore appears natural to ask how investors have priced sovereign bonds under these challenging conditions. The novel feature of this study consists in applying a conventional multifactor global market model to emerging market sovereign bond index rates of return that are denominated in US dollars and subsequently relating the unexplained residual from the market model’s estimates of each country’s total bond index return to country specific factors. They include political and financial risks as well as other presumed determinants of bond index rates of return. The estimation approach allows us to separate out the common influences of global bond market movements from the country-specific influences that drive rates of return on the outstanding bonds of 19 emerging market countries from Latin America, Transition Economies, Asian and African countries. The results of our study confirm that sovereign countries’ bond index rates of return that include interest payments and capital gains/losses may be explained in terms of conventional bond pricing models by combining global market factors with local risk and other country-specific influences. Unsurprisingly, emerging market bonds appear to be dancing to different tunes than those in developed economies.
    Keywords: Emerging bond markets, International investments, Sovereign bonds
    JEL: F21 F30 G15
    Date: 2004–08

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