nep-sea New Economics Papers
on South East Asia
Issue of 2007‒02‒17
twenty papers chosen by
Kavita Iyengar
Asian Development Bank

  1. China’s Exchange Rate Appreciation in the Light of the Earlier Japanese Experience By McKinnon, Ronald
  2. China y EE.UU.: La Competencia por Asia By Gustavo Cardozo
  3. Testing the purchasing power parity in China By Olivier Darné; Jean-François Hoarau
  4. The East Asian ‘Tigers’: Following Russia and Latin America? By Victor Krasilshchikov
  5. China’s swing from a planned Soviet-type economy to an ingenious socialist market economy: An account of 50 years By Arnaldo Gonçalves
  6. Inversiones Extranjeras en China By Victoria Natalizio; María Isabel Negre; Ya Wen Teh
  8. The impact of sea level rise on developing countries : a comparative analysis By Dasgupta, Susmita; Laplante, Benoit; Meisner, Craig; Wheeler, David; Jianping Yan
  9. Determinants of Business Success: An Examination of Asian-Owned Businesses in the United States By Alicia M. Robb; Robert W. Fairlie
  10. On the re-assessment of inequality in Indonesia: household survey or national account? By Yusuf, Arief Anshory
  12. Impacto Internacional de la Crisis de Asia - Un antes y un después By Emilia Zabaleta
  13. The economic consequences of the flight By Beja, Jr., Edsel
  14. Currency Crises and Monetary Policy in Economies with Partial Dollarisation of Liabilities By Peter Flaschel; Christian Proano; Willi Semmler
  16. Vietnam’s Accession to the WTO: Lessons from Past Trade Agreements By Philip Abbott; Jeanet Bentzen; Finn Tarp
  17. Constructing Indonesian Social Accounting Matrix for Distributional Analysis in the CGE Modelling Framework By Yusuf, Arief Anshory
  20. Market Risk in Demutualised Self-Listed Stock Exchanges: An International Analysis of Selected Time-Varying Betas By Andrew Worthington; Helen Higgs

  1. By: McKinnon, Ronald
    Abstract: For creditor countries on the periphery of the dollar standard such as China with current account surpluses, foreign mercantile pressure to appreciate their currencies and become more flexible is misplaced. Just the expectation of variable exchange appreciation seriously disrupts the natural tendency for wage growth to balance productivity growth and thus worsens the (incipient) deflation that China now faces. It could create a zero-interest liquidity trap in financial markets that leaves the central bank helpless to combat future deflation arising out of actual currency appreciation, as with the earlier experience of Japan. Exchange rate appreciation, or the threat of it, causes macroeconomic distress without having any predictable effect on the trade surpluses of creditor economies.
    Keywords: exchange rate, current account, China, Japan
    JEL: F31 F33 F42
    Date: 2006
  2. By: Gustavo Cardozo
    Abstract: El presente trabajo tendrá como objeto analizar el desenvolvimiento de la política exterior china en el ámbito asiático. Además, la nueva doctrina estratégica de Washington y su política sobre Asia y Corea Del Norte, son susceptibles de crear inconvenientes serios para los intereses estratégicos de Beijing. Se intentará dar un panorama de los cambios sufridos en las relaciones sino/norteamericanas por motivo del 11-S de 2001, fecha, en donde la República Popular China (R.P.Ch), pareció perder importancia antagónica para EE.UU. frente al terrorismo internacional.
    Keywords: china, asia, united states, strategy, foreign policy
  3. By: Olivier Darné; Jean-François Hoarau
    Abstract: In this paper we examine whether purchasing power parity holds in the long run in China for the period 1970:1 to 2006:5 from an alternative method relative to the previous studies. We underlined the effects of large, but infrequent shocks due to changes of Chinese exchange policy (undertaken since the China's foreign exchange reform) on the real exchange rate, using outlier methodology. We also show that there is no endency to the purchasing power parity in China to hold in the long run during this period.
    Keywords: Purchasing power parity; real exchange rate; unit root tests; outliers; renminbi.
    JEL: C22 F31
    Date: 2006
  4. By: Victor Krasilshchikov
    Abstract: Probably, the title of this paper is surprising for many specialists in various fields of economics, politics and other social sciences. Indeed, despite the financial-economic crisis of 1997-98, the newly industrialised countries (NICs) of East Asia (‘East Asia’ herein refers to East and Southeast Asia together) have been symbolised the successful development’s pattern for the non-western regions while neither Russia (and the other CIS countries, formerly republics of the USSR, as well) nor Latin American nations demonstrate fascinating achievements in development over the last fifteen-twenty years, good rates of the economic growth in some periods notwithstanding. By dynamics of the social indicators, such as a life expectancy, infants’ mortality, or human development index, the both regions lose competition to the East Asian countries, too. Therefore, it is seemingly difficult to find real foundations for a comparison of Russia and Latin American countries, on the one hand, and the East Asian NICs, on the other, if such a comparison is not used for banal conclusion about rather negative than positive results of reforms in the first case and acquired success in the second one. However, as Karl Marx once noted, “all science would be superfluous if the outward appearance and the essence of things directly coincided.” [Marx K., 1959, p. 797]. In the recent study, a matter of comparison can consist not only in a recognition of predominantly extensive character of the economic growth in the both groups of countries under consideration, as Paul Krugman argued in his famous paper of 1994 [Krugman P., 1994]. Also, it concerns some other invisible similarities hidden beyond the formal statistical indicators. Respectively, the object of this paper is threefold: at first, to find out such similarities; secondly, to propose the proper assessment of the Asian crisis of 1997-98 and the regional post-crisis recovery in light of Russian and Latin American experience over the last decades, and, thirdly, to stimulate discussion aimed at re-thinking widespread approaches to a complement of development studies.
    Keywords: East Asian ‘Tigers’, Russia, Latin America
  5. By: Arnaldo Gonçalves
    Abstract: China has met largely these targets in the first third of the period monitored and has experimented since 2000 a growth of its GDP about 8 % en 2000, 7.5 % in 2001, 8 % in 2002 and 9.1 % in 2003, according with international data. Due to its large and stable population, its rapidly growing economy and military spending and capabilities China is increasly looked as a world power and by this fact raises contradictory perceptions in its neighbors, rivals and competitors. This ascent of China to a primary role in the next decades hoists many important questions. How the West will accommodate to this economic and political climb? What strategy China’s neighbors will choose: a “containment” approach or a friendly but prudent partnership? And, finally, how China will act internationally when becomes a geopolitical power capable of projecting its military and economic magnitude?
    Keywords: planned economy, china, economic growth
  6. By: Victoria Natalizio; María Isabel Negre; Ya Wen Teh
    Abstract: mediante una aproximación descriptiva a las inversiones provenientes de capitales extranjeros que hoy operan en China, el presente trabajo pretende ser un aporte para el conocimiento de uno de los tantos fenómenos que se desprenden de este nuevo posicionamiento internacional del gigante asiático, sin precedentes en su historia.
    Keywords: foreign investment, china, PBI
  7. By: Terry McKinley (International Poverty Centre)
    Abstract: The U.S. economy is monopolizing global net savings, i.e., about two-thirds of the total. Other rich countries, such as Japan and Germany, oil exporters, such as Saudi Arabia, middleincome countries, such as China, and even some low-income countries, such as India and Indonesia, export capital to finance yearly U.S. current-account deficits. The resulting global imbalances are neither sustainable nor equitable. Capital should be recycled to poorer countries, instead of funneled, overwhelmingly, to the world’s largest rich country. Low-income countries need a substantially higher injection of real external resources and should be allowed to pursue more expansionary, growth-oriented economic policies. Blaming capital-exporting developing countries, such as China, for global imbalances is not the answer. Such countries are merely succeeding in developing rapidly. Other rich countries, which account for most capital exports, have to take the lead in dramatically restructuring their expenditures. They will be able thereafter to absorb a greater share of developing-country exports. The danger of a recession in the U.S. is rising, threatening growth in the rest of the world. U.S. policymakers have to move aggressively to contain private consumption, especially real estate spending, in favor of productive private investment, and boost exports relative to imports. Without such a structural adjustment, the danger of a ‘hard landing’ for the U.S. economy—and, by implication, for the rest of the world—will escalate.
    Keywords: Global capital flows, world economy, structural adjustment, poverty
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–03
  8. By: Dasgupta, Susmita; Laplante, Benoit; Meisner, Craig; Wheeler, David; Jianping Yan
    Abstract: Sea level rise (SLR) due to climate change is a serious global threat. The scientific evidence is now overwhelming. Continued growth of greenhouse gas emissions and associated global warming could well promote SLR of 1m-3m in this century, and unexpectedly rapid breakup of the Greenland and West Antarctic ice sheets might produce a 5m SLR. In this paper, the authors have assessed the consequences of continued SLR for 84 developing countries. Geographic Information System (GIS) software has been used to overlay the best available, spatially-disaggregated global data on critical impact elements (land, population, agriculture, urban extent, wetlands, and GDP) with the inundation zones projected for 1-5m SLR. The results reveal that hundreds of millions of people in the developing world are likely to be displaced by SLR within this century, and accompanying economic and ecological damage will be severe for many. At the country level, results are extremely skewed, with severe impacts limited to a relatively small number of countries. For these countries (such as Vietnam, A. R. of Egypt, and The Bahamas), however, the consequences of SLR are potentially catastrophic. For many others, including some of the largest (such as China), the absolute magnitudes of potential impacts are very large. At the other extreme, many developing countries experience limited impacts. Among regions, East Asia and the Middle East and North Africa exhibit the greatest relative impacts. To date, there is little evidence that the international community has seriously considered the implications of SLR for population location and infrastructure planning in developing countries. The authors hope that the information provided in this paper will encourage immediate planning for adaptation.
    Keywords: Wetlands,Climate Change,Population Policies,Country Strategy & Performance,Geographical Information Systems
    Date: 2007–02–01
  9. By: Alicia M. Robb (University of California, Santa Cruz); Robert W. Fairlie (University of California, Santa Cruz, RAND and IZA)
    Abstract: Using confidential and restricted-access microdata from the U.S. Census Bureau, we find that Asian-owned businesses are 16.9 percent less likely to close, 20.6 percent more likely to have profits of at least $10,000, and 27.2 percent more likely to hire employees than whiteowned businesses in the United States. Asian firms also have mean annual sales that are roughly 60 percent higher than the mean sales of white firms. Using regression estimates and a special non-linear decomposition technique, we explore the role that class resources, such as financial capital and human capital, play in contributing to the relative success of Asian businesses. We find that Asian-owned businesses are more successful than whiteowned businesses for two main reasons - Asian owners have high levels of human capital and their businesses have substantial startup capital. Startup capital and education alone explain from 65 percent to the entire gap in business outcomes between Asians and whites. Using the detailed information on both the owner and the firm available in the CBO, we estimate the explanatory power of several additional factors.
    Keywords: Asians, entrepreneurship, startup capital, self-employment
    JEL: J15 L26
    Date: 2007–01
  10. By: Yusuf, Arief Anshory
    Abstract: This paper is motivated by the inconsistency between food and non-food ex-penditure estimated from household survey data (SUSENAS) and from nationalaccount (I-O table) and its connection on the issue of inequality in Indonesia.Since non-food expenditure tend to be under-estimated when compared withnational account data, it imply the under-representation of the rich in the cal-culation of inequality in Indonesia. This paper, then applies an approach toreconciling household survey and national accounts data, by re-estimating thesampling weight through minimization of entropy distance of information takinghousehold survey weight as prior, while satisfying some aggregation constraints.The estimated weight then is used to calculate standard indicator of inequalityin Indonesia. The results suggests that while inequality in rural Indonesia doesnot change much, due to possible under-representation of the rich in the survey, inequality in urban Indonesia is highly under-estimated. The "Jakarta factor"seems to account mostly to this discrepancy.
    Keywords: inequality; Indonesia; entropy
    JEL: C80 D63
    Date: 2006–08–14
  11. By: Sergei Soares (International Poverty Centre, UNDP/IPEA); Emanuela di Gropello (World Bank)
    Abstract: The paper investigates why some schools in East Asia and Latin America are more efficient in the use of resources than others. It estimates input and output efficiencies and uses efficiency scores as dependent variables in analysis of variance and regression analyses. Input and output efficiencies are calculated using “hard” inputs such as number and quality of teachers and student socio-economic status, and “soft” inputs such as management; sorting and school autonomy are then used as explanatory variables in the variance and regression analysis. The results indicate that private management and student selection lead to high efficiencies and this result is negative for those who hope for quality public education for all; greater school autonomy leads to higher efficiencies, even for public schools that do not practice selection.
    Keywords: Efficiency, Education quality, School inputs, Poverty
    JEL: B41 D11 D12 E31 I32 O54
    Date: 2006–04
  12. By: Emilia Zabaleta
    Abstract: Este ensayo presenta una evaluación macroeconómica cuantitativa del impacto de esta crisis sobre la economía mundial y su extensión a los países emergentes. Se ilustraran ciertas incertitudes relativas concernientes al contexto internacional del momento, como el impacto de la baja del dólar, y las reacciones de la política monetaria, entre otras.
    Keywords: rice crisis, asia, dolar, monetary policy
  13. By: Beja, Jr., Edsel
    Abstract: Capital flight is an economic threat to development. It aggravates resource constraints by making them more binding, thus undermining long-term economic growth. The downward spiral in the macroeconomic performance as the effect of capital flight results in lost jobs; in turn, this condition intensifies capital flight, thus creating a negative feedback process that undermines the structure of the country. As a result, the country that is lagging behind on the economic ladder is knocked several rungs down by capital flight, leading to the underdevelopment of the country. Counterfactual calculations for the Philippines reveal that capital flight lowered the quality of its economic growth and meant lost jobs. The sustained capital flight between 1970 and 2000 cost the country to lose its opportunity to achieve an economic take-off and to become an Asian economic tiger. Unless the Philippine government introduces decisive actions to address capital flight – its causes and the mitigation of the impacts – the country will remain caught in the perpetuity of crises, hollowed-out, and trapped in poverty.
    Keywords: Capital flight; Economic Consequences; Philippines
    JEL: E60 O40 E10 F40 O53
    Date: 2007–02–12
  14. By: Peter Flaschel (University of Bielefeld); Christian Proano (University of Bielefeld, IMK at the Hans Boeckler Foundation); Willi Semmler (New School for Social Research, New York)
    Abstract: The right response to a speculative attack on the domestic currency by monetary authorities in a country with liabilities in US dollars has been a matter of hot debate among academics and policy makers especially after the East Asian Crisis. Using a modified version of the currency crisis model discussed in Proano, Flaschel and Semmler (2005) the authors show that an increase of the domestic interest rate by the central bank as a response to the speculative attack can have serious negative effects on aggregate demand by depressing the investment activity of those domestic firms which are not indebted in foreign currency. The authors demonstrate that in specific situations the standard (IMF supported) increase of the domestic interest rate might not be the best response to a speculative attack on the domestic currency from a medium term point of view.
    Keywords: Mundell-Fleming-Tobin model, liability dollarisation, debt-financed investment, financial crisis, currency crisis, deflation.
    JEL: E31 E32 E37 E52
    Date: 2006–06
  15. By: Hyun H. Son (United Nations Development Programme); Nanak Kakwani (United Nations Development Programme)
    Abstract: This paper develops a new methodology to compute social cost of living indices. These indices indicate whether or not price changes have a favourable (or unfavourable) impact on the welfare of the poor. The indices are derived on the basis of two alternative classes of social welfare functions. The methodology developed in the paper is applied to compute social cost of living indices for Thailand and Korea. The empirical results show that changes in prices have generally affected the poor more adversely than the non-poor.
    Keywords: Social Cost of Living, Democratic and Plutocratic costs of living indices, Social expenditure function, Social budget shares, Atkinson’s inequality measures, Substitution bias
    JEL: F16 J31
    Date: 2006–01
  16. By: Philip Abbott (Purdue University); Jeanet Bentzen (Department of Economics, University of Copenhagen); Finn Tarp (Department of Economics, University of Copenhagen)
    Abstract: This paper examines Vietnam’s experience with bilateral trade agreements and compares subsequent outcomes with predictions from existing computable general equilibrium (CGE) models. Those model based assessments have greatly underestimated the impact of past agreements. Tariff reform is not the main factor driving economic adjustments, and market imperfections mean there is potential for greater output and trade expansion. The key questions to ask in future research are what critical new institutional reforms WTO accession will bring, and what incentives will be put in place to determine the evolution of investment by sector.
    Keywords: trade liberalization; bilateral trade agreements; WTO accession; Vietnam
    JEL: F13 F14 O24 O53
    Date: 2007–02
  17. By: Yusuf, Arief Anshory
    Abstract: The distributional impact of policies analyzed in the CGE modelling framework have been constrained in part by the absence of a Social Accounting Matrix (SAM) with disaggregated households. Since Indonesian official SAM does not distinguish households by income or expenditure size, it has prevented accurate assesment for the distributional impact, such as calculation of inequality or poverty incidence. This paper describes how the Indonesian SAM for the year 2003, with 181 industries, 181 commodities, and 200 households (100 urban and 100 rural households grouped by expenditure per capita centiles) was constructed. The SAM (with the size of 768x768 accounts) constitutes the the most disaggregated SAM for Indonesia at both the sectoral and household level. SAM Construction is an essential part of CGE modeling, and this documentation provides greater transparency as well as replicability for further improvement.
    Keywords: Social Accounting Matrix; Computable General Equilibrium; Indonesia
    JEL: D58 D30
    Date: 2006–11–30
  18. By: Nanak Kakwani (International Poverty Centre); Hyun H. Son (International Poverty Centre)
    Abstract: This paper proposes a new “Pro-Poor Policy (PPP)” index, which measures the pro-poorness of government programmes, as well as basic service delivery in education, health and infrastructure. The index provides a means to assess the targeting efficiency of government programmes compared to perfect targeting. The paper also deals with the policy issue of how targeting efficiency of government programmes varies across various socioeconomic groups. To this effect, the paper develops two types of PPP indices by socioeconomic groups, which are within-group and total-group PPP indices. The within-group PPP index captures how well targeted a programme is within a group. On the other hand, if our objective is to maximize poverty reduction at the national level, the targeting efficiency of particular group should be judged on the basis of total-group PPP index. Using micro unit-record data on household surveys from Thailand, Russia, Vietnam, and 15 African countries, the paper evaluates a wide range of government programmes and basic services.
    Keywords: Targeting, Universal, Pro-Poor, Poverty
    JEL: C15 I32
    Date: 2005–05
  19. By: Hyun H. Son (International Poverty Centre)
    Abstract: This paper proposes a methodology to assess the pro-poorness of government fiscal policies in view of bringing marginal reforms. A government policy is said to be pro-poor if it benefits the poor proportionally more than the non-poor. The author first derives the poverty elasticity for the general class of poverty. Then, using the idea of poverty elasticity, she proposes a pro-poor index that can be utilized to assess government expenditure and tax policies. This index may be useful in making the government fiscal system more beneficial towards the poor through marginal reforms. The proposed methodology is applied to Thailand, utilizing the 1998 Socio-Economic Survey.
    Keywords: Poverty, Income distribution, Pro-poor, Tax policy, Public spending
    JEL: I3 D31 H2 H3
    Date: 2006–04
  20. By: Andrew Worthington; Helen Higgs (School of Economics and Finance, Queensland University of Technology)
    Abstract: This paper examines market risk in four demutualised and self-listed stock exchanges: the Australian Stock Exchange, the Deutsche Börse, the London Stock Exchange and the Singapore Stock Exchange. Daily company and MSCI index returns provide the respective asset and market portfolio data. A bivariate MA-GARCH model is used to estimate time-varying betas for each exchange from listing until 7 June 2005. While the results indicate significant beta volatility, unit root tests show the betas to be mean-reverting. These findings are used to suggest that despite concerns that demutualised and self-listed exchanges entail new market risks that merit regulatory intervention, the betas of the exchange companies have not changed significantly since listing. However, market risk does vary considerable across the exchanges, with mean time-varying betas of 0.56 for the Deutsche Börse, 0.66 for the London Stock Exchange, 0.78 for the Singapore Stock Exchange, and 0.95 for the Australian Stock Exchange. Key words: Accounting scandals, Enron, WorldCom, Event study, International Stock Markets.
    Keywords: Time-varying betas; moving average; bivariate GARCH; demutualization and self-listing, exchanges

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