nep-sea New Economics Papers
on South East Asia
Issue of 2006‒09‒11
eight papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Business cycle synchronisation in East Asia By Fabio Moneta; Rasmus Rüffer
  2. Enterprise Ground Zero in China By Krug, B.
  3. THE ROLE OF SMALL FIRMS IN CHINA’S TECHNOLOGY DEVELOPMENT By Lundin, Nannan; Sjöholm, Fredrik; Qian , Jinchang
  4. Rational Entrepreneurship in Local China: Exit Plus Voice for Preferential Tax Treatments By Zhu, Z.; Hendrikse, G.W.J.; Krug, B.
  5. Framing China: Transformation and Institutional Change By Krug, B.; Hendrischke, H.
  6. Corporate Governance, Crony capitalism and Economic Crisis: Should the US Business Model replace the Asian Way of 'Doing Business'? By Ajit Singh; Ann Zammit
  7. Dynamic Consumption Behavior: Evidence from Japanese Household Panel Data (Revised version) By Yukinobu Kitamura
  8. Expectations and Contagion in Self-Fulfilling Currency Attacks By Tood Keister

  1. By: Fabio Moneta (Finance Department, Carroll School of Management, Boston College, 140 Commonwealth Avenue, Chestnut Hill, MA 02467-3808, USA.); Rasmus Rüffer (European Central Bank, Kaiserstrasse 29, 60311 Frankfurt am Main, Germany.)
    Abstract: Against the background of the rapid inter- and intraregional integration of East Asia, we examine the extent and nature of synchronisation of business cycles in the region. We estimate various specifications of a dynamic common factor model for output growth of ten East Asian countries. A significant common factor is shared by all Asian countries considered, except China and Japan. The degree of synchronisation has fluctuated over time, with an upward trend particularly evident for the newly industrialised countries. Synchronisation appears to mainly reflect strong export synchronisation, rather than common consumption or investment dynamics. Cross-country spill-over effects explain only a small part of the comovement in the region. More importantly, a number of exogenous factors, such as the price of oil and the JPY-USD exchange rate, play an important role in synchronising activity. In addition, economic linkages with Europe and North America may also have contributed to the observed synchronisation. JEL Classification: E30, F00.
    Keywords: Business cycles synchronisation, East Asia, dynamic factor model.
    Date: 2006–08
  2. By: Krug, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The paper claims that the analysis of the private business sector needs to concentrate on entrepreneurship. Based on fieldwork the paper proceeds by describing how Chinese entrepreneurs perceive the (economic) problems whose solutions pre-determine the economic performance of new firms. Entrepreneurship takes the form of institution building by which the high transaction costs can be mitigated and the value of assets and contracts be protected. The empirical research identified corporate governance, incentive contracts, local autonomy and networking as the crucial “hybrids†for mobilising investment and limiting moral hazard.
    Keywords: Entrepreneurship;Chinese Business Sector;Local Autonomy;Networking;
    Date: 2006–06–30
  3. By: Lundin, Nannan (European Institute of Japanese Studies); Sjöholm, Fredrik (European Institute of Japanese Studies); Qian , Jinchang (National Bureau of Statistics of China)
    Abstract: Science & Technology (S&T) is high on the Chinese policy agenda but there are large uncertainties on the actual S&T development. For instance, previous studies tend to focus only on large and medium-sized enterprises (LMEs). The situation in Chinese small firms is far less explored. This paper aims to examine the role of S&T-based small firms. More precisely, we examine how much S&T that has been accounted for by small firms and how their S&T intensity differs across industries and ownership groups. We also analyze how various firm characteristics differ over size categories and S&T status. This study is based on newly processed micro level data provided by the National Bureau of Statistics with information on a large number of S&T indicators for small-, medium-, and large-sized manufacturing firms in China in 2000 and 2004. Our results suggest that small firms in Chinese S&T resemble their role in many other countries. They account for a comparably small share of total S&T and most small firms are not engaged in any S&T. However, those small firms that do engage in S&T tend to be more S&T intensive and have a higher output in terms of patents than larger Chinese S&T firms.
    Keywords: Technology; SMEs; China; S&T; R&D
    JEL: O30 O31 O53
    Date: 2006–08–15
  4. By: Zhu, Z.; Hendrikse, G.W.J.; Krug, B. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Bearing the legacy from central-planned system, the tax system in local China still lacks transparency and, in many cases, the liabilities of firms, especially those with extensive influences, are subject to negotiation despite the new tax-reform 1994. Applying Hirschman’s Exit-Voice theory, we construct a game model of interplay between firm and local government, in terms of exit and voice for preferential tax treatments, thereby revealing dynamics of these two options under rational entrepreneurship of economizing transaction cost. Suggested by the model, exit not only induces firm to opt for voice, it also underpins firm’s voice that forces local government to compromise. Particularly, when holding private information of exit cost, firm is able to mimic behaviors of those with high mobility so as to boost the effectiveness of voice. The empirical cases fully illustrate such rational entrepreneurship of exit plus voice to profit from local preferential policy.
    Keywords: Exit;Voice;Preferential Tax Treatments;Tax Competition;China;
    Date: 2006–03–10
  5. By: Krug, B.; Hendrischke, H. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: The paper offers a frame for investigating the extent to which decentralisation, and subsequent locally chosen institutions shape private organisational and institutional innovation. To include the numerous locally based “economic regimes†matters as the resulting business system reflects political institution setting and private organisational innovation. Such a frame is a necessary first step for empirical studies attempting to explain the heterogeneity of China’s business systems, the emergence of hybrid organisations, and last but none the least, the different growth rates that can be observed across China.
    Keywords: Transition Economy;Institutional Change in China;Private Business Sector;
    Date: 2006–06–30
  6. By: Ajit Singh; Ann Zammit
    Abstract: This paper considers the Greenspan/Summers/IMF (GSI) argument that the Asian way of doing business was the deep cause of the Asian crisis. The IMF reform programme for the crisis-affected Asian countries suggested they should abandon the Asian business model and adopt the US corporate model. The main findings are: a) contrary to GSI doctrine, poor corporate governance and lack of competition are not common characteristics of the Asian business model; b) that the stock-market based US business model has severe limitations for developing country corporations, not least because of imperfect share prices and the imperfect market for corporate control.
    Keywords: Asian and US corporate models; stock markets; Asian crisis
    JEL: D21 G3 O1
    Date: 2006–06
  7. By: Yukinobu Kitamura
    Abstract: Household consumption and saving behavior have been the central theme of recent macroeconomic literature. Following the work of Robert Hall (1978) and a series of papers by Fumio Hayashi, the focus of the literature has been on dynamic consumption behavior. Using the Family Income and Expenditure Survey (FIES), we conducted a dynamic panel analysis of consumption behavior. We examined intertemporal smoothing and the durability of consumption behavior with or without liquidity constraints. Our results are summarized as follows: (1) households with debt as well as debt-free households with low annual incomes and net savings faced disposable income constraints; (2) for these types of households, parameter values of lagged dependent variables between MLE and GMM are very close and therefore statistically significant and the implications for each remain more or less the same; (3) debt-free households with high annual incomes and net savings also faced a disposable income constraint in MLE that is not expected in the permanent income-lifecycle hypothesis.
    Keywords: dynamic consumption, panel data, liquidity constraints
    JEL: C23 D12 E21
    Date: 2006–09
  8. By: Tood Keister (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM))
    Abstract: This paper shows how expectations-driven contagion of currency crises can arise even if the currency market has a unique equilibrium when viewed in isolation. The model of Morris and Shin (1998) is extended to allow speculators to trade in a second currency market. If speculators believe that a devaluation of this other currency will make a domestic devaluation more likely, they will engage in trades that link the two markets. A sharp devaluation of the other currency will then be propagated to the domestic market and will increase the likelihood of a crisis there, fulfilling the original expectations. Even though this contagion is driven solely by expectations, the model places restrictions on observable variables, and these restrictions are broadly consistent with existing empirical evidence.
    Date: 2005–04–13

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