nep-sea New Economics Papers
on South East Asia
Issue of 2007‒03‒31
ten papers chosen by
Kavita Iyengar
Asian Development Bank

  1. Estimates of the steady state growth rates for selected Asian countries with an endogenous growth framework By Rao, B. Bhaskara
  2. How Would China's Exports be Affected by a Unilateral Appreciation of the RMB and a Joint Appreciation of Countries Supplying Intermediate Imports? By Mizanur RAHMAN; Willem THORBECKE
  3. Political Party and Party System Institutionalisation in Southeast Asia: A Comparison of Indonesia, the Philippines, and Thailand By Andreas Ufen
  4. How Should We Measure Poverty in a Changing World? Methodological Issues and Chinese Case Study By Lars Osberg; Kuan Xu
  5. The EU’s Foreign Policy after the Fifth Enlargement: Any Change in Its Taiwan Policy? By Günter Schucher
  6. Top Incomes in Indonesia, 1920-2004 By Andrew Leigh; Pierre van der Eng
  7. The Impact of Exchange Rate Volatility on Indonesia’s Exports to the USA: An Application of ARDL Bounds Testing Procedure By Arief Bustaman; Kankesu Jayanthakumaran
  8. Do institutions matter for FDI? A comparative analysis for the MENA countries By Daniele, Vittorio; Marani, Ugo
  9. Returns to Investment in Agriculture By Steven Haggblade
  10. Is It Time to Get Radical? A Game Theoritic analysis of Asian Crisis and Capital Control By martawardaya, Berly; Salotti, Simone

  1. By: Rao, B. Bhaskara
    Abstract: This paper develops an endogenous growth ramework with externalities due to learning by doing and trade openness to show that these externalities are significant for 6 Asian countries. The estimated parameters of the augmented production functions are used to compute the steady state growth rates for Singapore, Malaysia, Thailand, Hong Kong, Korea and the Philippines. A few broad policies to improve these steady state growth rate are suggested.
    Keywords: Endogenous Growth; Learning by Doing Trade Openness; Steady State Growth Rate; Newly Developing Asian Countries.
    JEL: O53 O40 O29 O33 O30 O39 O38 O10
    Date: 2007–03–27
  2. By: Mizanur RAHMAN; Willem THORBECKE
    Abstract: In 2005 55% of China's exports were "processed exports" produced using intermediate goods that came from other countries. The lion's share of the volume of imports for processing and of the value-added of processed exports came from other East Asian countries. We investigate how a unilateral appreciation of the RMB and a joint appreciation of countries supplying intermediate inputs would affect China's exports. To do this we estimate a panel data model including ordinary and processed exports from China to 33 countries. Results obtained using generalized method of moments techniques indicate that a joint appreciation would significantly reduce China's processed exports while a unilateral appreciation would not.
    Date: 2007–03
  3. By: Andreas Ufen (GIGA Institute of Asian Studies)
    Abstract: It is generally acknowledged that a higher degree of party and party system institutionali-sation is positively correlated with the consolidation of democracy. It is, thus, useful to compare different levels and types of institutionalisation. In this article the distinction made by Levitsky (‘value infusion’ vs. ‘behavioural routinisation’) with reference to party institutionalisation will be employed. Moreover, institutionalised party systems are char-acterized, according to Mainwaring and Torcal, by ‘stability of interparty competition’. The empirical research of this paper finds that the early organisational consolidation of so-cial cleavages, such as in Indonesia, enhances institutionalisation. Furthermore, the rela-tion between central and local elites appears to be essential: strong bosses or cliques un-dermine institutionalisation in the Philippines and in Thailand respectively. Most Indone-sian parties are better institutionalised than those in the Philippines and Thailand with reference to ‘value infusion’. In addition, the party system in Indonesia is better institu-tionalised in terms of ‘stability of interparty competition’.
    Keywords: political party institutionalisation, party system institutionalisation, South-east Asia, Indonesia, Philippines, Thailand
  4. By: Lars Osberg; Kuan Xu (Department of Economics, Dalhousie University)
    Keywords: development; poverty, measurement, China, growth
    Date: 2007–02–23
  5. By: Günter Schucher (GIGA Institute of Asian Studies)
    Abstract: On 1 May 2004, the world witnessed the largest expansion in the history of the European Union (EU). This process has lent new weight to the idea of an expanded EU involvement in East Asia. This paper will examine the question of whether there has been a change in the EU’s foreign policy with respect to its Taiwan policy after the fifth enlargement. It analyses the EU’s policy statements on Asia and China to find evidence. The political behaviour of the EU has not changed, although there has been a slight modification in rhetoric. The EU – notwithstanding its claim to be a global actor – currently continues to keep itself out of one of the biggest conflicts in East Asia. The new members’ interests in the East Asia region are too weak to alter the EU’s agenda, and their economic priorities are rather linked to the programmes of the EU than vice versa.
    Keywords: EU, enlargement, Central and Eastern European countries, foreign policy, China, Taiwan
    JEL: F13 F51 F59
  6. By: Andrew Leigh; Pierre van der Eng
    Abstract: Using taxation and household survey data, this paper estimates top income shares for Indonesia during 1920-2004. Our results suggest that top income shares grew during the 1920s and 1930s, but fell in the post-war era. In more recent decades, we observe a sharp rise in top income shares during the late-1990s, coincident with the economic downturn, and some evidence that top income shares fell in the early-2000s. For pre-war Indonesia, we decompose top income shares by income source, and find that for groups below the top 0.5 percent, a majority of income was derived from wages. Throughout the twentieth century, top income shares in Indonesia have been higher than in India, broadly comparable to Japan, and somewhat lower than levels prevailing in the United States.
    Keywords: inequality, top incomes, personal income taxation, Indonesia
    JEL: H24 N35 O15
    Date: 2007–03
  7. By: Arief Bustaman (Department of Economics, Padjadjaran University); Kankesu Jayanthakumaran (Discipline of Economics, University of Wollongong)
    Abstract: This paper investigates the long-run and short-run impacts of exchange rate volatility on Indonesia’s exports of priority commodities to the United States of America over the monthly period 1997-2005. Estimates of cointegration relations are obtained using ARDL bounds testing procedure. Estimates of the short-run dynamics are obtained using an error-correction model. The results show significant positive and negative coefficients among the range of commodities. However, in the long-run, majority of commodities tend to support the traditional view that higher exchange rate of volatility leads to higher cost and to less foreign trade. The net effect of exchange rate uncertainty on production and exports depends on the degree of relative risk aversion of the exporter of various commodities. This ultimately influences the reallocation of resources by participants.
    Keywords: Exchange rate volatility, exports, ARDL bounds testing, error-correction model, Indonesia
    JEL: C32 F14 F31 F41
    Date: 2006–12
  8. By: Daniele, Vittorio; Marani, Ugo
    Abstract: The paper analyses the underpinning factors of foreign direct investments towards the MENA countries. Our main interpretative hypothesis is based on the significant role of the quality of institutions to attract FDI. In MENA experience the growth of FDI flows proved to be notably inferior to that recorded in the EU or in Asian economies, such as China and India. Our research, firstly, stresses three major factors for such a poor performance: i) the small size of local markets and the lack of real economic integration; ii) the changes in the scenario of international competition; iii) economic and trading reforms in the MENA have been slow and mostly insufficient. Using the Kaufmann, Kraay and Mastruzzi (2005) governance indicators, we examine the role of “institutional quality” on FDI trough a regression analysis. Our analysis show as institutions play an important role in the relative performances of countries in attracting FDI. At last, data on institutional quality and business climate show the relative disvantages of MENA. Our paper suggests as MENA countries require deep institutional reforms in order to improve the attractiveness in terms of FDI.
    Keywords: FDI; Institutions; MENA Countries
    JEL: F13 F43
    Date: 2006–06
  9. By: Steven Haggblade (Department of Agricultural Economics, Michigan State University)
    Abstract: Investment in agriculture is necessary for ensuring rapid economic growth and poverty reduction in Zambia, as elsewhere in Africa. Yet many of the key investments required to accelerate agricultural growth – technological research, rural infrastructure and market standards, organization and enforcement -- are public goods. Because the private sector cannot capture gains from these investments, they will not invest in amounts sufficient to ensure broad-based agricultural growth. Therefore, the public sector needs to provide the necessary research, transport and market infrastructure necessary to stimulate agricultural growth. Zambia currently allocates 6% of government outlays for agriculture. This is less that the 10% commitment Zambia has made under the CAADP agreement and far less than the 15% spent by Asian countries at the launch of their Green Revolution. In allocating these funds, Zambia spends the majority of its discretionary agricultural budget on recurrent subsidies for private farm inputs, primarily fertilizer, while spending far less on rural infrastructure and technology development. Yet international evidence suggests that returns to private input subsidies are typically lower than returns to investments in public goods, in part because private input subsidies are prone to rent-seeking and in part because public input subsidies substitute for private financing of these private inputs. Investment in public goods such as agricultural research and extension, rural roads and irrigation typically produce returns two to six times greater than spending devoted to input subsidies. Therefore, a reorientation of public spending, away from private input subsidies and towards increased investment in public goods, would likely accelerate agricultural growth in Zambia.
    Keywords: food security, food policy, Zambia, agriculture growth, public investment
    JEL: Q19
    Date: 2007
  10. By: martawardaya, Berly; Salotti, Simone
    Abstract: Policymakers in modern and open economies face a macroeconomic trilemma (Obstfeld, Shambaugh, and Taylor 2005). There are three main sought-after objectives: 1. to stabilize the exchange rate; 2. to enjoy free international capital mobility 3. to engage in a monetary policy oriented toward domestic goals. Three main questions that we try to answer are : How the crisis exacerbated by international investor racing to pull out their capital from affected coutnries? Can capital control reduce it? Can capital control reduce contagion effect and regional financial instability? Using game theoritical framework and insight from behavioral economics, we analyzed herd behaviour of international investors in the time of financial crisis. Under free international capital mobility, uncertainty and lack of coordination among investors with short-horizon, we found prisoner dilemma type of arrangement that exacerbated financial crisis. Applying the anylisis to multi-stage game with government, we found that a credible threat of capital control could reduce herd behaviour and escape the worst of financial crisis. Therefore, fredom to employ capital control is a policy tool that enable escape from the trilemma and pursue all three goals at the same time. We modify the framework to include multiple countries under financial crisis and fear of contagion. We found the ability to impose capital control, under certain conditions, will isolate the crisis and reduce contagion effect. We also explore the critical value when capital control should be enacted with regard to domestic economic condition, on which government political mandate base upon, and differences of reactions in relation to political regime. We conclude by citing incidences of insistance toward comitment against capital control by IMF in loans approcal and US in free trade agreement as misdirected, unncessesary and even harmful in some cases.
    Keywords: Asiena crisis; game theory; capital control
    JEL: F32 C72
    Date: 2006–11–24

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